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Asia markets retreat following Wall Street caution

Friday 02.15 GMT

Overview

Asian markets retreated following another cautious session on Wall Street overnight. Investors have headed to the sidelines as they digest the Federal Reserve’s most recent policy meeting and await the closely watched US jobs report due later on Friday.

Hot topic

Central banks have been in focus this week. The Bank of Japan, Federal Reserve and Bank of England have all kept monetary policy on hold and have struck relatively upbeat tones in their commentaries.

Although the Fed still looks on track to raise interest rates this year, the prospect of tighter policy looks to be offering less support to the US dollar. Rather, growing uncertainty around the impact of US President Donald Trump’s fiscal policies have reversed the greenback’s rally since he was elected in November. The US dollar index was flat on Friday at 99.803, close to a two-and-a-half-month low.

What to watch

The release of US employment data will be closely watched. The economy is expected to have added 180,000 jobs in January and the unemployment rate is expected to remain steady at 4.7 per cent, according to the media estimate of analysts surveyed by Bloomberg.

Equities

Chinese markets opened for the first time in a week as the lunar new year public holiday ended. The Shanghai Composite was down 0.4 per cent, while the technology-focused Shenzhen Composite eased 0.3 per cent.

Hong Kong’s Hang Seng, which has been trading since Wednesday, was off 0.7 per cent and Australia’s S&P/ASX 200 was 0.2 per cent lower.

Japan’s Topix pared early gains to be flat as a stronger yen put pressure on exporters.

Forex

The yen was 0.2 per cent stronger at ‎¥112.58 per dollar and was on track for its fourth advance in five sessions and a 2.2 per cent gain for the week. The currency see-sawed as the Bank of Japan surprised markets with the size of its bond purchases on Friday.

The Australian dollar eased 0.1 per cent to $0.7648, eyeing its first decline in six sessions.

With Chinese markets open again, the renminbi was trading at Rmb6.8703 per dollar, 0.2 per cent stronger than its previous trade a week ago.

Fixed income

Yields on Japanese government bonds were whipped around on Friday after the BoJ bought more bonds than expected in its market operations. The central bank on Tuesday flagged reducing the size of today’s offering in 5- to 10-year bonds, but instead matched last week’s figure of ‎¥450bn.

The 10-year JGB yield was up 2.7 basis points at 0.143 per cent. On Thursday it closed above 0.1 per cent for the first time since January 29, 2016 when the BoJ decided to cut interest rates into negative territory for the first time.

Commodities

Oil markets were firmer, with Brent crude, the international benchmark, up 0.6 per cent at $56.88 a barrel and West Texas Intermediate up 0.5 per cent at $53.82. Gold was down 0.2 per cent at $1,213.43 an ounce.

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