Gold Begins to Recover, What's Next?
Asian stocks traded slightly, holding near all-time highs on Wednesday, ahead of the release of crucial US jobs data. Market sentiment was still supported by weak US retail sales data, which reinforced the belief that the Federal Reserve would cut interest rates in the second half of the year.
The MSCI Asia Pacific Index was barely changed after two days of gains that brought the index to a new record. However, the market's direction was not entirely solid after Wall Street's correction on Tuesday, with investors returning to risk-off, particularly in technology stocks.
In the bond market, US Treasury futures maintained their gains after the 10-year yield fell to its lowest level in about a month in the previous session. Cash bond trading activity in Asia was also quieter due to the Japanese market being closed. Amid the decline in yields, gold—which tends to benefit from falling interest rates—moved up slightly, as money markets began to increase the odds of three interest rate cuts this year.
Weaker-than-expected US retail sales data signaled that consumption's support for the economy is weakening at the end of the year. This situation makes this week crucial: the market awaits Wednesday's jobs report and Friday's inflation data to gauge the next direction in interest rates, while uncertainty in the technology sector remains looming due to heavy corporate spending on artificial intelligence development.
Several market participants believe the jobs report will be a key determinant. Consensus projections point to a payroll increase of around 65,000 in January, with the unemployment rate expected to remain at 4.4%. Furthermore, there will be an annual revision of employment data, potentially showing a downward correction in total employment for the year to March 2025, increasing market sensitivity to this release.
Beyond the data, comments from Fed officials also shape expectations. Some officials believe interest rates can be held on hold longer while assessing incoming data, while others emphasize that additional cuts would require a more pronounced weakening in the labor market. On the corporate side, some view the sharp decline in software stocks last week as an overreaction, and believe the US economy still has room to grow thanks to productivity and support from corporate profits. (asd)
Source: Newsmaker.id
