Asian Markets Buoyed by Upbeat US Jobs Data

What’s happening: Asian markets closed mostly higher on Monday following blockbuster jobs data from the US.

What happened: Global equity markets extended their record run after the US NFP (nonfarm payrolls) report signalled that the country's economic recovery remains on track.

However, one of the major stock markets in Asia bucked the uptrend and settled lower on Monday.

Why it matters: The US released its NFP report on Friday, which showed a rise in nonfarm payrolls by a higher-than-expected 850,000 in June. However, the country’s unemployment rate surprisingly rose to 5.9% in June, from the previous month’s reading of 5.8%. One of the closely watched metrics, the average hourly earnings, rose 0.3%, but came in lower than the consensus estimate of 0.4%.

Driven by strong jobs data, all three major US indices closed the week at new record highs. The sharp surge on Wall Street lifted investor sentiment in Asia, resulting in stocks markets extending their rally on Monday.

Equity trading volumes remained thinner than normal on Monday, with US markets being closed for the Fourth of July weekend.

“Overall the level of payrolls is still 6.8 million below pre-pandemic February 2020 levels and is still below the level of substantial progress needed by the Fed. As such there is nothing in this report for the Fed to become hawkish about," National Australia Bank analysts said in a research note.

China’s Shanghai Composite index gained 1.14% on Monday, while Hong Kong’s Hang Seng index closed lower after China’s government ordered the removal of Didi from its app stores. India’s BSE Sensex rose 0.75% to close at 52,880.00.

Japanese stocks remained under pressure, however, due to rising covid-19 cases in Tokyo, just a few weeks before the Olympics are scheduled to begin in the city. Japan’s Nikkei 225 settled lower by 0.64% at 28,598.19 on Monday. Markets recovered this morning, after the country released data showing a 11.6% rise in household spending in May, with average cash earnings rising 1.9% from year-ago levels.

What to watch: Investors will focus on the release of minutes from the recent Federal Open Markets Committee meeting. Fed policymakers had surprised markets at their previous meeting by signalling two rate hikes by the end of 2023.

Crude oil will be in focus today amid news of another delay in the OPEC+ (Organization of the Petroleum Exporting Countries and its allies) decision on crude output.

Context: Crude oil recorded gains after the OPEC+ failed again to reach a deal on oil output policy on Monday.

Details: Oil prices have climbed more than 45% in the first half of the year on a sharp rebound in demand due to the reopening of economies around the world. Both US and Brent crude prices jumped last week, reaching their highest levels since October 2018.

The OPEC and its allies were unable to reach an agreement on oil output last week, due to increased tensions among some of its members. The agreement fell through on Thursday, while no breakthrough was reached during the meeting on Friday.

The group’s current output limits will continue to remain in place in case no deal is reached, which will cause severe supply constraints, even as demand remains elevated with countries emerging from their pandemic-led lockdowns.

WTI for August delivery had climbed 2.13% to $76.76 per barrel at 0830 GMT. Brent had added 0.49% to reach $77.54 per barrel. While WTI has gained more than 58% year to date, Brent crude has climbed almost 50%.

What to watch: Markets will keep an eye on the developments in OPEC talks. Investors will also monitor the reopening of restrictions and the resulting increase in the demand for oil.

Traders await reports on crude oil stockpiles from the API (American Petroleum Institute) and EIA (Energy Information Administration), which will be released a day later than usual due to Monday’s holiday.

Other Markets: European trading indices closed higher on Monday, with the FTSE 100, German DAX 30, French 40 and STOXX Europe 600 up by 0.58%, 0.08%, 0.22% and 0.34%, respectively.

Germany’s factory orders, construction PMI and ZEW indicator of economic sentiment, Spain's industrial production, Eurozone’s construction PMI, ZEW indicator of economic sentiment and retail sales, France’s construction PMI and retail sales, Italy’s construction PMI, UK’s construction PMI, Mexico’s gross fixed investment, as well as US services PMI, composite PMI, IBD/TIPP economic optimism index and ISM services PMI.

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