Japanese shares gain on Suga's resignation as markets look to U.S. jobs data

Alun John, Reuters

Posted at Sep 03 2021 02:29 PM

Japan Prime Minister Yoshihide Suga speaks during a news conference after the government's decision to extend a state of emergency amid the COVID-19 pandemic, at the prime minister's official residence in Tokyo May 28, 2021. Behrouz Mehri, pool via Reuters
Japan Prime Minister Yoshihide Suga speaks during a news conference after the government's decision to extend a state of emergency amid the COVID-19 pandemic, at the prime minister's official residence in Tokyo May 28, 2021. Behrouz Mehri, pool via Reuters

HONG KONG - Japanese shares jumped on Friday after officials said Prime Minister Yoshihide Suga would step down, while the dollar was at a month low against major peers as traders awaited U.S. employment data with global equity markets at record highs.

Japan's TOPIX stock index rose to a 30-year high and was last up 1.50% after news broke that the embattled Suga would step down in September and not run for relection as leader of the ruling Liberal Democatic Party.

The Nikkei gained 1.87%.

"Suga's decision not to run for the leadership of the LDP reduces the risk of a big loss at the next general election ... That has given relief to market participants in Japan," said Masayuki Kichikawa, chief macro strategist at Sumitomo Mitsui Asset Management.

Away from Japan, MSCI's broadest index of Asia-Pacific shares outside Japan edged up 0.12%, with gains in Australia up 0.40% and Korea 0.66% higher.

If the gains hold, the regional benchmark would post its ninth session of advances in the past 10 as it edges back towards its position in mid July before Chinese regulatory crackdowns sent shares tumbling.

Asian shares are still off their peaks from earlier in the year however, and lagging those elsewhere. MSCI's all-country world index which ended the previous session at its fifth consecutive closing high, inched higher still on Friday.

U.S. stock futures rose 0.18%, but pan-region Euro Stoxx 50 futures were down 0.06% and FTSE futures fell 0.06%.

Chinese blue chips were down 0.20% and Hong Kong was off 0.54%, bucking the trend as traders tried to balance weaker economic data out of China against the potential for future stimulus.

Activity in China's services sector slumped into sharp contraction in August, a private survey showed on Friday, hurt by restrictions imposed to curb the COVID-19 Delta variant.

With other surveys from this week also indicating that growth in China is slowing, investors anticipate Beijing will accelerate fiscal spending and credit growth, but that such measures will be finely targeted as the U.S. Federal Reserve prepares to taper its own stimulus.

FED IN FOCUS

The Fed's intentions are also on traders' minds on Friday as they hope to get a better sense of the timing and pace of U.S. tapering after U.S. non-farm payroll data is published later in the day.

Fed Chair Jerome Powell has suggested an improvement in the employment numbers is the remaining major prerequisite for action.

According to a Reuters survey of economists, non-farm payrolls likely increased by 750,000 jobs last month after rising by 943,000 in July.

"When it comes to tapering the focus is now the labour market. If we’re in the area of 750,000 the expectation will be for a September tapering announcement," said Stefan Hofer, Hong Kong-based chief investment strategist at LGT private bank.

Hofer said he was focused on leisure and hospitality jobs as they were a good indicator of the state of the recovery from the pandemic.

U.S. treasuries have been cautious ahead of the data release, and the yield on benchmark 10-year Treasury notes was last 1.2937% compared with its U.S. close of 1.294% on Thursday.

The dollar stayed pinned at month lows against a basket of currencies, with the euro doing a fair amount of the work.

The European single currency touched its highest level since early August against the greenback early in Asian hours Friday, as markets start to react to the potential for more sustained eurozone inflation and reduced stimulus from the European Central Bank.

Oil prices dropped as traders squared positions ahead of the U.S. non-farm payrolls, but were set for small weekly gains.

U.S. crude dipped 0.21% to $69.84 a barrel. Brent crude fell 0.03% to $73.01 per barrel.

(Reporting by Alun John in Hong Kong; additional reporting by Kevin Buckland in Tokyo; Editing by Stephen Coates)