Marketmind: Reluctance to resume buying before US jobs report

A look at the day ahead in Asian markets by Alden Bentley, Americas Breaking News Editor for Finance & Markets

The early 2024 shake out continued on Wall Street, after having spilled over into Asian trade on Wednesday, and marks a potential headwind for Japanese shares when they reopen on Thursday.

The Nikkei rose 28 per cent in 2023, biggest yearly gain in a decade, ending it less than 1.0 per cent shy of a 33-year high set in November. Tokyo markets have been shut for a public holiday and will reopen Thursday.

But other Asian stock markets extended a global sell-off on Wednesday, while their currencies mainly fell against the dollar. MSCI's broadest index of Asia-Pacific shares outside Japan was down almost 1.5 per cent after a 1.0 per cent drop on Tuesday in a sluggish start to 2024. The index rose 4.6 per cent in 2023.

Data wise, there is nothing big on the docket until Friday's U.S. payrolls number. Wednesday's U.S. release of the minutes from the December Federal Open Market Committee meeting barely moved the markets. It looks unlikely to have any spill over into Thursday's trade, confirming that policymakers were on the cusp of easing this year, and saw the battle against runaway inflation as all but won.

"While acknowledging inflation pressures have diminished, they still have to move more carefully to ensure orchestrate the soft-landing that everyone has bought into," Charlie Ripley, Senior Investment Strategist for Allianz Investment Management in Minneapolis, said in a client note.

CPI data next week will show whether they are on base. But for percolating market incentives, the mid-month start of U.S. Q4 earnings release period could help determine whether the S&P 500 takes a run at setting a record high it fell just short of marking last week.

Fourth quarter S&P 500 earnings are forecast to rise 5.2 per cent, which is lower than the 11 per cent growth estimate from Oct. 1, according to LSEG data. For 2024 year-over-year earnings are expected to rise 11.1 per cent.

The S&P 500 was down 0.6 per cent in late afternoon trade and the Nasdaq was off more than 1.0 per cent, with big tech and chip stocks leading the way. The dollar rose to a two-week high against the yen and ended up about 0.9 per cent. Versus the yuan, it rose to its highest price since Dec. 13.

Here are key developments that could provide more direction to markets on Thursday:

- US ADP National Employment (December)