Asian shares falter as markets await Fed policy clues from US job data, STI down 0.4%

Pedestrians walking past a share prices board in Tokyo on Nov 4.
Pedestrians walking past a share prices board in Tokyo on Nov 4. PHOTO: AFP

TOKYO (REUTERS) - Asian shares slipped on Friday (Nov 6) as investors braced for US employment data that is expected to bolster the case for a Federal Reserve interest rate increase as early as next month.

MSCI's broadest index of Asia-Pacific shares outside Japan edged down about 0.36 per cent at 0310 GMT, though it remained on track for a 0.7 per cent weekly rise.

Singapore's Straits Times Index was down 0.43 per cent at 3,010.71 as of 12 pm.

Japan's Nikkei added 0.5 per cent, poised for a 0.6 per cent weekly gain. The Shanghai Composite pared earlier gains to climb 0.36 per cent, putting it on track for a jump of 4.5 per cent for the week.

Wall Street marked modest losses after a mixed spate of earnings, as investors awaited the non-farm payrolls report later this session.

"This is a big piece of data as to what the Fed is looking for," said Scott Colyer, chief executive officer of Advisors Asset Management in Monument, Colorado. "I think everybody wants them to move or not move. The month-to-month stuff is killing everybody."

On Thursday, US interest rates futures implied traders saw a 58 percent probability of a rate increase in December, according to CME Group's FedWatch programme, while US two-year Treasury yields hit their highest levels in 4-1/2 years.

Economists expect the report to show that US employers added 180,000 jobs in October, more than September's increase of 142,000 jobs.

New US applications for jobless benefits last week recorded their biggest increase in eight months, but remained above the threshold associated with a healthy labour market.

"We're a little below consensus," said Jennifer Vail, head of fixed-income research at US Bank Wealth Management in Portland, Oregon.

But based on recent comments from central bank officials,"it looks as if as long as we hit a 150-number, the Fed will think it's consistent with labour tightening," she said, adding that US yields and futures were increasingly showing expectations for a December hike.

Fed chair Janet Yellen and New York Fed president William Dudley said this week that the US was ready for higher interest rates if upcoming economic data justified them.

Higher yields and rising expectations of a December rate hike lifted the US dollar index, which last stood at 97.913, slightly lower than a three-month peak of 98.135 scaled overnight.

The dollar slipped 0.1 per cent to 121.64 yen after touching a 2 1/2-month high of 122.01 on Thursday, while the euro added about 0.1 per cent to US$1.0889 after dropping to a nadir of US$1.0834, its lowest level in more than three months.

The stronger dollar added further pressure to crude oil futures, which were already dragged down by oversupply concerns.

US crude pared some losses, increasing about 0.3 per cent to US$45.32 a barrel, but was still on track to lose 2.7 per cent for the week.

Other commodities also struggled, with London copper sliding to its lowest level in a month overnight. While it recovered 0.4 per cent to US$5,032.50 a tonne, it was still set to end the week 1.6 per cent lower, its third consecutive weekly loss.

Spot gold recovered to US$1,108.06 an ounce from an eight-week low on Thursday, on track for a 2.9 per cent loss for the week, the most in eight months.