Asian stocks rose on Friday after optimism over US tax reform plans lifted Wall Street shares to new highs, while the dollar hovered near a seven-week peak following additional indications of solid economic growth.
MSCI’s broadest index of Asia–Pacific shares outside Japan edged up 0.1 per cent, poised for a 1.4 per cent gain on the week.
Japan’s Nikkei climbed 0.3 per cent, Australian stocks rose 0.7 per cent and South Korea’s KOSPI advanced 0.9 per cent.
The S&P 500 posted its sixth straight record high close on Thursday, its longest run since 1997, as investors cheered increased prospects for a tax overhaul with Congress moving closer to agreement on a budget resolution.
Wall Street shares were lifted again as new indicators pointed to robust US economic growth.
Thursday’s data showed the number of Americans filing for unemployment benefits fell more than expected, a narrowing in the trade deficit and evidence of strong orders for core capital goods.
The latest boost in US economic optimism lifted Treasury yields and helped take the dollar index against a basket of major currencies to the seven-week high.
US data released this week has been solid on the whole, with investor focus now turned to the closely-watched nonfarm payrolls report due at 1230 GMT. This is of key interest to the financial markets was how hurricanes Harvey and Irma may have impacted employment in September.
“The hurricanes have made employment conditions difficult to pin down and market reaction could be limited regardless of how strong or weak the outcome is,” said Shin Kadota, senior strategist at Barclays in Tokyo.
Economists expect just 90,000 new US jobs for September, down from 1,56,000 in August, according to a Reuters poll.
“If the results are strong, it would enhance expectations for the Fed to raise interest rates in December. But whether expectations for rate hikes beyond December could be raised is another matter, with the Fed keeping a cautious stance on prices and with (Chair Janet) Yellen's term ending in February,” Kadota at Barclays said.
Interest rate futures traders are now pricing in an 86 per cent likelihood of a December rate hike, up from 78 per cent a week ago, according to the CME Group’s FedWatch Tool.
The dollar index was effectively flat at 93.941 after rising to 93.990, its highest since August 17.
The euro was steady at $1.1712 after losing 0.4 per cent the previous day. It was on track to end 0.9 per cent lower on the week, during which it plumbed a near two-month low of $1.1695.
The dollar was little changed at 112.800 yen and on track for a weekly gain of 0.3 per cent.
Falling bond prices extended overnight gains in the 10-year US Treasury yield to 2.355 per cent, heading back towards a three-month high of 2.371 set on Monday. The yield had momentarily dropped to 2.300 per cent mid-week.
In commodities, Brent crude was down 0.1 per cent at $56.93 a barrel. The futures contract had surged 2.1 per cent overnight on signs Saudi Arabia and Russia would limit production through next year.