Stocks Gain, Yen Surges as Focus Shifts to US Jobs: Markets Wrap

European stocks futures and Asian shares climbed amid a tech rally, as investors await a critical jobs report in the US that may set the tone for equity bulls next week. The yen surged to a three-week high.

Euro Stoxx 50 futures contracts rose 0.2%, tracking a rally in contracts for US stocks following Apple’s earnings in after hours trading. In Asia, Hong Kong stocks led the gains with a measure for regional stocks hitting its highest level since February. Stocks also rose in Korea and Australia, while they were closed for trading in mainland China and Japan.

US non-farm payroll data, due later Friday, becomes the next big potential trigger for markets after Federal Reserve chief Jerome Powell effectively laid conversations of a potential rate hike to rest, while still keeping a window open for rate cuts later in the year. The forecast gain of 240,000 would be the weakest since November.

“With the relative strength of the U.S. economy keeping the doves at bay for the time being, we are aware that any surprise” in the jobs report “could create an outsized rates market reaction,” said Simon Ballard, chief economist at First Abu Dhabi Bank.

Hong Kong stocks gained for a ninth straight session as tech rallied. The Hang Seng Tech index rose as much as 4.1%, compounding a 4.5% advance Thursday, as Alibaba Group Holding Ltd., Tencent Holdings Ltd and JD.com Inc. touched fresh 2024 highs.

“Even after the sharp rally, valuations for the China tech stocks are still well below historical average” and compared with global peers, said Vey-Sern Ling, managing director at Union Bancaire Privee. “The strong performance in the past two weeks is probably attracting more fund inflows for fear of missing out.”

The yen touched a three-week high against the greenback in Friday trading and headed for its best week since December 2022. The currency has likely gotten official support, with estimates indicating Japan spent more than $20 billion in its latest round of intervention.

The yen’s volatility jumped to its highest level this week amid suspicion of intervention, which is threatening to derail carry trades that involved borrowing the Japanese currency to invest in emerging market currencies.

An index of the dollar weakened for a third day, reflecting lower US yields as Treasuries rallied across the curve. The US 10-year yield fell five basis points to 4.58%, while the policy-sensitive two-year yield dropped nine basis points. Treasuries trading in Asia is closed due to the holiday in Japan. Australian and New Zealand yields fell Friday.

The Fed decided Wednesday to leave the target range for the benchmark rate at 5.25% to 5.5% following a slew of data that pointed to lingering price pressures. Yet Chair Jerome Powell said it’s unlikely that the Fed’s next move would be to raise rates.

“While the Fed appears to have all but ruled out a rate hike, it also made clear it’s willing to keep rates higher for longer,” said Chris Larkin at E*Trade from Morgan Stanley. “The markets will be hungry for any data suggesting the economy isn’t heating up any more than it did in the first quarter.”

A survey conducted by 22V Research shows that 30% of the investors polled think Friday’s jobs report will be “risk-on,” 27% expect a “risk-off” reaction, and 43% said “mixed/negligible.” Among the labor indicators, the tally showed investors will be paying the most attention — by far — to average hourly earnings.

The options market is betting that stocks will swing widely after Friday’s US jobs report, which traders expect will offer more clarity on how much the Fed may cut interest rates this year.

The S&P 500 is expected to move 1.2% in either direction after the release, based on the cost of at-the-money puts and calls expiring Friday, according to Stuart Kaiser, Citigroup Inc.’s head of US equity trading strategy. That figure, based on the prices of S&P straddles as of Wednesday’s close, is the largest implied swing ahead of an employment report since March 2023, he said.

European Earnings

Societe Generale SA’s profit for the first quarter exceeded expectations, boosted by a strong showing from its equities traders, who outshone their bond counterparts for the fourth straight quarter.

Credit Agricole SA also beat analysts’ estimate for net income with corporate and investment banking helping the French lender pull forward a target to reach annual adjusted profit of €6 billion ($6.4 billion) in 2024, a year ahead of schedule.

Meanwhile, Danske Bank retained its full-year net income forecast after pre-tax profit beat analysts’ estimate boosted by its laarge corporates and institutions business.