Asian shares edged up after a surprising U.S. job data, but China worry caps gains

On Monday, stocks in Asia edged up following the surprising data on US jobs. However, concerns about China’s economic slowdown capped regional gains.

Japan’s benchmark Nikkei added 0.33% while MSCI’s broadest index of Asia-Pacific shares outside Japan gained 0.27%. 

China’s Shanghai Composite stood flat and so did Hong Kong’s, Hang Seng.

Traders expect European shares to give up some of the gains made on Friday after the US payroll data. The pan-European Euro Stoxx 50 futures down 0.14%, German DAX futures slipping 0.04% and FTSE futures losing 0.35%.

On Friday, the Wall Street rose near records high on the strong jobs data, and some positive signs about the US-China trade talks. The benchmark S&P closed within 0.2% of its peak set in late November.

U.S job growth increased to its highest in 10 months in November as the healthcare industry boosted hiring and production workers at General Motors returned to work after a strike.

The increase is a strong sign that the world’s largest economy is not in danger of stalling.

“This economy is still climbing and shattering the records for longevity,” said Chris Rupkey, a chief financial economist at MUFG Union Bank.“

China hopes to reach a trade agreement with the US that satisfies both sides as soon as possible. Chinese Assistant Minister Ren Hongbin said on Monday.

Larry Kudlow, the top White House economic adviser said on Friday that a Dec. 15 deadline is still in place to impose a new round of U.S. tariffs on Chinese consumer goods. But, President Trump was happy with where trade talks with China were going.

Investors still think the data could change if the trade war escalates and the imminent trade tariffs take effect after Dec 15.

The market has been working on assumptions that Trump will drop of postponed the tariffs, given that the US and China agreed in October to come to a trade deal.

China’s exports shrank sending shivers to the market

Meanwhile, Chinese exports shrank for the fourth consecutive month in November. The shrinking sent shivers through the market already concerned about a damage trade war has done to global demand.

However, growth in imports was seen as a possible sign that China’s stimulus efforts over the last two years was helping to stir demands.

“Although the trade data did not have much impact, concerns about slowing growth and a lack of government stimulus are capping the Chinese shares’ upside,” said Naoki Tashiro, president of TS China Research.

“Yet chip-related shares are doing well, suggesting investors are still positive on the outlook of Sino-U.S. trade talks overall,” he added.

U.S. Treasury yields climbed on the strong employment report, with benchmark 10-year notes rising to 1.843%.

The Fed Reserve’s Open Market Committee (FOMC) kicks off its two-day policy meeting on Tuesday. 

The Fed is expected to highlight the economy’s resilience and keep interest rates on hold in the range of 1.50% to 1.75%.

Analysts said the much better-than-expected jobs report offset mixed signals from recent economic data and validated the Fed’s wait-and-see stance on interest rates after three “insurance cuts” this year.

Oil prices retreated but hovered near recent peaks after OPEC and its allies agreed to deepen output cuts by 500,000 barrels per day in early 2020.

U.S. West Texas Intermediate (WTI) crude slipped 0.4% to $58.94 per barrel, still not far from Friday’s 2-1/2-month high of $59.85 per barrel.

Brent futures were down 0.3% at $64.21 per barrel.

In the currency market, the dollar maintained a firm tone on Monday, with the dollar index standing at 97.648 and the euro changing hands at $1.1061, both little changed on the day.

Against the Japanese yen, the dollar last traded at 108.59 yen, flat on the day.

Elsewhere, the GBP rose to as high as $1.3180, its highest in seven months. Versus the euro, the currency hit a 2-1/2-year high of 84.07 pence per euro on Monday.

GBP has been bolstered by expectations that Prime Minister Boris Johnson’s Conservative Party will win an outright majority in the upcoming election on Thursday, thereby ending a hung parliament and political paralysis on Brexit.