Stocks Dip and Dollar Weakens as Job Report and Price Index Awaited

SadaNews - Global stocks have slightly dipped, while the dollar remained steady near its lowest levels in two months, as investors remain cautious ahead of key U.S. economic data that may provide signals about the upcoming interest rate trajectory. In contrast, the Japanese yen recorded gains.

The MSCI Asia-Pacific Index fell by 1.2%, with more than four stocks declining for every one that rose. A Chinese stock index also trended toward a technical correction amid concerns over an economic slowdown. In addition, U.S. equity futures declined in Asian trading before the release of the November jobs report on Tuesday, which is expected to reflect weakness in the labor market.

Currencies and Commodities Under Scrutiny

Bitcoin traded near $86,000, while gold largely stabilized after five days of gains. Meanwhile, oil continued to trade near its lowest level since 2021, as traders evaluate the prospects of reaching a ceasefire in Ukraine.

In Asia, currencies dominated the scene, with the yen rising against the dollar, trading near the 155-yen mark per dollar, ahead of a widely expected move by the Bank of Japan to raise the benchmark interest rate to its highest level in three decades on Friday.

The dollar index also traded at levels last seen in early October. In contrast, the Indian rupee fell to record lows, as an increasing number of officials called for a stronger yuan to rebalance the Chinese economy.

Volatile Year-End and Data Anticipation

These movements reflect a heightened sense of caution in the final weeks of a year marked by sharp fluctuations, which began with the lows recorded by the markets in April when U.S. tariffs shook investor confidence.

This was followed by a recovery driven by artificial intelligence and easing monetary policy from the Federal Reserve. As numerous important economic data are anticipated this week, investors will receive a clearer picture of whether this trajectory can continue.

José Torres from Interactive Brokers stated, "It seems investors are hesitant to take bold steps ahead of a heavy package of prominent economic data."

Jobs Report and Fed at the Heart of Attention

Following the latest interest rate cut by the Federal Reserve, the November jobs report will be pivotal for investors assessing the trajectory of interest rates.

The report will also include an estimate for job numbers in October, which had been delayed due to a government shutdown, while the U.S. Consumer Price Index is scheduled for release on Thursday.

U.S. 10-year Treasury yields settled near 4.17%, after a slight decline on Monday, amid bets that the Fed will cut interest rates twice next year to support the labor market, despite ongoing signs of inflation resilience.

With the Fed's focus remaining more on labor market weakness than inflation, a "bad news is good news" dynamic for the market in the jobs report is likely, according to Chris Larkin from E*TRADE, a subsidiary of Morgan Stanley.

Larkin commented, "As long as the numbers do not indicate a sharp collapse in employment, the markets may welcome weak data as it could push the Fed towards a more dovish stance."

Divergent Views Among Policymakers

Federal Reserve Board member Stephen Miran considered the current stance of monetary policy to be unnecessarily restricted. Federal Reserve Bank of New York President John Williams stated that policy is well-positioned for next year after last week's cut.

In contrast, Boston Federal Reserve Bank President Susan Collins indicated that the decision to cut rates was "difficult," amid her concerns about persistent high inflation.

In another context, Nasdaq, the second-largest stock exchange in the U.S., is seeking regulatory approval to extend trading hours on its stock platforms to 23 hours during weekdays.

Investors Focus on the Yen

In Japan, investors are focusing on the yen, with widespread expectations that Bank of Japan Governor Kazuo Ueda will raise interest rates on Friday. However, the future path has become more ambiguous as the government's need for low-cost financing conflicts with the weakening yen, which raises import prices.

Japanese 10-year government bond yields reached 1.97%, the highest in 18 years, earlier this month, prompting Ueda to warn last week that they are rising "at a somewhat rapid pace."

Hirofumi Suzuki, chief forex market strategist at Sumitomo Mitsui Banking Corporation in Tokyo, said, "The yen maintains its strength and moves toward the 154 range against the dollar, supported by expectations of an interest rate hike this week." He added, "However, with the anticipation of U.S. jobs data, substantial buying momentum for the yen is unlikely."

Concerns Over Data Quality and Bond Outlook

In the United States, Ian Lingen from BMO Capital Markets noted clear concerns regarding data quality, as the Bureau of Labor Statistics is still compensating for delays caused by the government shutdown, which could lead investors to adopt a more cautious stance in this week's trading.

If market expectations hold true, this could pave the way for another strong rally in U.S. Treasuries, which are on track for their best annual performance since 2020.

Lingen stated, "Nonetheless, what the jobs and inflation reports carry in indicators will set the tone for the U.S. interest rate market as we approach year-end and enter the quieter seasonal trading markets."