Asian Share markets on Monday opened cautiously as the US statistics highlighted downside risks for this week’s June payrolls report. The commotion about a potential recession was still fueling a relief rally in government bonds. Despite early trading being minimal due to closed US markets, the search for safety held the US dollar at 20-year highs.
Cash Treasury markets were closed, but futures continued to rise, suggesting that 10-year rates were holding at roughly 2.88 percent, down 61 basis points from their peak in June. While Japan’s Nikkei rose 0.9 percent, MSCI’s largest index of Asia-Pacific shares outside of Japan only gained 0.3 per cent. However, after barely varying on Friday, both the S&P 500 and Nasdaq futures declined by 0.4 percent.
Every S&P 500 sector, except for energy, experienced negative returns amid high volatility in the first half of the year, according to David J. Kostin, an analyst at Goldman Sachs.
He said, “The current bear market has been fully driven by valuation as opposed to the outcome of reduced earnings projections. However, we expect consensus profit margin predictions to decline whether or not the economy enters a recession, which will lead to downward EPS [earnings per share] revisions.”
On July 15, the start of the earnings season, expectations were revised downward due to high expenses and deteriorating data. In addition, the closely followed GDP Now prediction from the Atlanta Federal Reserve has dropped to an annualised -2.1 percent for the second quarter, indicating the US was already technically in a recession.
The Friday payrolls report is anticipated to indicate a slowing in job growth to 270,000 in June and a slight slowing in average wages to 5%.
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