- The significant cooling of U.S. non-farm employment data in June and the revision of historical data led traders to lower their expectations for the Federal Reserve's sequential rate hikes in the second half of the year. Federal funds rate futures indicate that the probability of maintaining rates unchanged in September has risen to 46.8%.
- The Asian Purchasing Managers' Index (PMI) generally improved, with Japan's service sector returning to expansion and China's overseas demand for services reaching the fastest growth rate in 20 months, supporting a 1.3% rebound in the MSCI Asia Pacific (excluding Japan) index.
- Driven by bargain hunting in chip stocks, the South Korean stock market surged 3% after significant fluctuations, and the Nikkei Index also reversed early losses to close higher. Meanwhile, in the foreign exchange market, the USD/JPY remained around 161.125 amid light trading during the Independence Day long weekend holiday.
Cooling U.S. Labor Market Lowers Rate Hike Probability
Data released on Thursday showed a significant slowdown in U.S. non-farm job growth in June, with downward revisions to the previous two months' data, indicating a cooling labor market. As some workers exited the market, the unemployment rate fell to 4.2%, and the labor force participation rate dropped to its lowest point in over five years. This macroeconomic data directly challenges the Federal Reserve's existing narrative of sequential rate hikes in the second half of the year. According to CME tools, rate futures pricing shows that the implied probability of the Fed maintaining rates unchanged at the September meeting has significantly increased from 35.8% the previous day to 46.8%, with rate hike expectations cooling considerably.
Asian Purchasing Managers' Index Strengthens Economic Expansion
The Purchasing Managers' Index (PMI) data released on Friday showed that the intrinsic momentum of major Asian economies is strengthening. After a brief slight stagnation in May, Japan's service sector re-established its expansion trajectory in June. Meanwhile, although the overall pace of expansion in China's service sector slightly slowed, its overseas new order demand recorded the fastest growth in 20 months. The continued expansion of major regional economic indicators provided crucial defensive support for the Asian equity markets, which had faced two consecutive days of sell-offs.
Chip Stock Buying Surge Drives Rebound in Asian Equity Assets
Boosted by the cooling of Fed rate hike expectations and improved PMI data, major Asian stock indices experienced a volatile rebound. The MSCI Asia Pacific (excluding Japan) index ultimately rose 1.3% after initial sharp fluctuations. Among them, the previously hard-hit chip sector saw a surge of intensive buying, driving the Korea Composite Stock Price Index to soar by 3%. The Nikkei Index in Japan also reversed its early sluggish trend to close up 0.7%, indicating a marginal recovery in risk appetite for growth assets in the region following the tech stock sell-off.
Independence Day Holiday Nears, Leading to Stabilized Volatility in Forex and Commodity Assets
With U.S. markets closed on Friday for the Independence Day holiday, overall liquidity in global financial markets tended to be light. In the foreign exchange market, the U.S. dollar index slightly fell by 0.2% to 100.80, and the USD/JPY remained flat at 161.125, with traders remaining highly vigilant about potential new intervention methods by Japanese authorities ahead of the long weekend. In commodities, Brent crude futures slightly rose to $72.12 per barrel, while spot gold benefited from lower U.S. Treasury yields, significantly rising by 1.4% to $4,179.73 per ounce.
