he Asian session began with a strong ongoing reaction to the Bank of Japan’s asset purchase program. The Nikkei 225 gapped higher on the open and was at one stage up 4.7%. Prices have retreated in the afternoon session but are still up a healthy 2% at this stage.
The picture was different elsewhere in Asia. The Hang Seng is around 2.5% lower in afternoon trading after returning from yesterday’s public holiday. Reports of deaths due to bird flu had traders increasing risk premiums. Airline stocks were sold, with China Southern Airlines falling as much as 14% in early trade and Cathay Pacific down 6%.
Apart from the strength in Japan, it was a generally weak day for Asian stock markets with most indices trading lower. This soft tone looks like transferring to European markets with pre markets indicating a flat to slightly softer tone to the open as traders await the US jobs number.
Expectations for jobs growth have been wound back in recent days following the ADP jobs survey and yesterday’s higher jobless claims. The greatest market risk could now be tilted towards a figure that significantly exceeds expectations. The NFP number is very volatile from one month to the next but has averaged about 205,000 over the past 4 months. A better than expected figure of around 250,000 last month with no major revision to the previous number would see this trend average maintained. This may be seen as a credible result in the face of increased taxes and reduced government spending.
In currency markets, it was all about the yen in early Asian trade with most currencies rallying sharply against the Japanese unit. This is now being reversed late in the session, with USD: JPY and others now below yesterday’s close in volatile trading. If today’s high proves to be a short term peak, technical traders will be watching the development of rising wedge formations in some yen pairs.
Commodity markets generally traded close to yesterday’s close in the Asian session and like other markets may take their cue from the US jobs report. After 3 days of heavy selling, precious metals are a focus for traders as they approach much discussed long term support levels at around $1535 in gold and $26.16 in silver.