Asia shares up as US jobs report seen lowering chance of Fed rate hike in September

A pedestrian walks past an electronic indicator of the Tokyo stock market displayed in the window of a securities company in Tokyo on June 16, 2016
A pedestrian walks past an electronic indicator of the Tokyo stock market displayed in the window of a securities company in Tokyo on June 16, 2016PHOTO: AFP

TOKYO (REUTERS) - Asian shares rose on Monday (Sept 5), getting a tailwind from gains on Wall Street after a weaker-than-expected US jobs report prompted markets to trim expectations that the Federal Reserve would hike interest rates as early as this month.

MSCI's broadest index of Asia-Pacific shares outside Japan was 0.5 per cent higher in early trade.

Japan's Nikkei stock index surged 1 per cent to three-month highs.

US nonfarm payrolls rose by 151,000 jobs in August after an upwardly revised 275,000 increase in July. Economists polled by Reuters had expected payrolls to rise by 180,000.

"What matters is not whether the markets think that was a strong jobs number, but whether Fed policymakers do," said Mitsuo Imaizumi, chief currency strategist at Daiwa Securities in Tokyo, who noted that Fed vice chairman Stanley Fischer said late last month that the US job market was close to full strength.

Richmond Federal Reserve Bank president Jeffrey Lacker said on Friday that the US economy appears strong enough to warrant significantly higher interest rates.

Markets priced in a 21 per cent chance of a Fed interest rate increase this month on Friday, down from 24 per cent the previous day, according to CME Group's FedWatch program. But the odds for a December hike edged up to 54.2 per cent from 53.6 per cent on Thursday.

BNY Mellon senior global markets strategist Marvin Loh expects the Fed to hold off on any rate hikes until December, when they can factor in three additional jobs reports as well as the US third-quarter growth report.

"We will add that we have been fooled by the FOMC on September moves in prior years and vow not to fall into that same trap again," Mr Loh wrote.

Markets were also keeping a watch on the two-day summit of leaders from G20 nations, in Hangzhou, China. Chinese President Xi Jinping said at the open of the summit on Sunday that global economy is being threatened by rising protectionism and risks from highly leveraged financial markets.

The dollar edged down 0.2 per cent to 103.77 yen after rising as high as 104.32 on Friday, its highest since July 29.

The euro rose 0.1 per cent to US$1.1162 ahead of Thursday's European Central Bank interest rate decision.

Most economists expect the central bank to hold policy steady, though some believe the ECB could extend its asset buying programme.

Crude prices inched down, paring their robust gains in the previous session amid worries over a global oil glut.

Brent crude was down 0.6 per cent at US$46.53 a barrel while US crude slipped 0.7 per cent to US$44.13. Both had gained 3 percent in the previous session as the dollar slipped after the employment data, making oil cheaper for investors holding other currencies.

But for the week, Brent fell 6 per cent, its biggest drop in five weeks, while US crude fell nearly 7 per cent to mark its largest decline in eight weeks.