By 4 Minute Read* MSCI Asia ex-Japan index -0.4%; globe markets underperformed in H1* Dollar reaches 15-month high vs. yen, 4-month high vs. euro* The payrolls statistics on Friday will be the focus of everyone’s attention. Reuters, SINGAPORE, July 1 – Stocks began the second half of 2021 in a muddled manner on Thursday, dropping in Asia on concerns over additional coronavirus illnesses and new lockdowns, while bond markets were jittery and the dollar moved higher ahead of US labor data. After a month-end selloff, equity futures indicated to a minor comeback in Europe, with Euro Stoxx 50 futures up 0.4 percent, FTSE futures up 0.1 percent, and S&P 500 futures treading water at record high levels and were last up roughly 0.15 percent. Japan’s Nikkei lost 0.3 percent and MSCI’s broadest index of Asia-Pacific equities outside Japan fell 0.4 percent in an Asia session reduced by a Hong Kong holiday. The dollar rose to a four-month high of $1.1839 per euro and a 15-month high of 111.18 yen against the euro. On the phone from Singapore, ING economist Rob Carnell said, “The virus is still playing a role… although it’s tough to discern any direction in anything at the moment.” “There’s a widespread sense that the dollar isn’t such an awful unit to be holding,” he said, as traders awaited Friday’s jobs report from the United States, which will provide the next clue on the Federal Reserve’s rate stance. “Everyone seems to be a touch anxious.” In China, stocks rose modestly in celebration of the Communist Party’s centennial, but President Xi Jinping’s nationalist speech in Tiananmen Square did nothing to calm geopolitical jitters, and the currency dropped slightly. Data from Asia showed a mixed picture, with Japanese manufacturers’ optimism at a two-and-a-half-year high but manufacturing activity decreasing across the region – particularly in Vietnam and Malaysia – as the epidemic resurfaced. Retail sales in Germany fell short of estimates. Slower vaccination rates in Asia, as well as the extension of limitations to combat the virus’ spread, as well as a regulatory crackdown on Chinese tech behemoths, have kept regional markets in the doldrums this year. The MSCI ex-Japan index finished the first half with a 5.8% gain, compared to a 11.4 percent increase for world equities and a 14.4% gain for the S&P 500, which ended last month with its fifth consecutive record closing high. Market investors will be looking for trading indications from euro zone unemployment, a meeting of Sweden’s central bank, and visits later in the day from Bank of England Governor Andrew Bailey and European Central Bank President Christine Lagarde. However, traders believe that U.S. payrolls on Friday will startle markets awake from their slumber, which has seen currencies locked in some of their narrowest trading ranges in decades. The overnight implied volatility of the dollar/yen is at its highest level in more than three months. Private payrolls in the United States surpassed expectations overnight, albeit they are an inconsistent predictor of Friday’s broader data. Reuters polled economists, who predicted a 700,000 job growth in June, up from 559,000 in May. However, there is a lot of diversity among the 63 estimates, which range from 376,000 to more than a million people. “Unless the monthly jobs report disappoints, the year’s high at 93.4 is the target to beat for the dollar index,” analysts at DBS Bank in Singapore wrote in a note. In the Asia session, the US dollar index, which measures the greenback against a basket of six major currencies, reached 92.483, its highest level since April. In Asia, the yield on ten-year US Treasury bonds remained unchanged at 1.4696 percent. Metals prices appear to be stabilizing below May highs, while oil prices are moving closer to multi-year highs reached earlier this week. Brent oil futures were last trading at $74.69 a barrel, up 0.1 percent. Corn futures rose sharply overnight as lower-than-expected planting in the United States bolstered prices. Tom Westbrook contributed reporting, and Himani Sarkar edited the piece./n
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