Asian stocks fluctuated on Friday after a bigger-than-expected rise in US private-sector jobs poured cold water on hopes for an interest rate cut in the next few months.
The losses across most markets tracked another weak day on Wall Street, where concerns grow that an end-of-year rally may have gone ahead of itself, leading investors to pull out of some of the biggest gainers -- mainly tech titans such as Apple and Amazon.
Data on Thursday from payroll firm ADP showed far more private-sector jobs were created last month than forecast and significantly more than in November.
While the figures also showed wage growth slowing, the reading reinforced the view that the labour market was still very tight and posed a threat to the Federal Reserve's goal of bringing inflation down to its two percent target. It is currently at 3.3 percent.
That gave a jolt to optimism the central bank would cut interest rates as soon as the first quarter of this year, with Bloomberg News saying traders now see about a 65 percent chance of that, compared with around 85 percent last week.
"There was nothing within the data that would suggest any urgency from policymakers to begin normalising rates lower during the first quarter," BMO Capital Markets' Ian Lyngen said.
The figures came a day after minutes from the Fed's December meeting showed officials expected to keep borrowing costs at a two-decade high for some time as they want to make sure they have inflation under control.
Attention now turns to the release later Friday of the closely watched non-farm payrolls report, which could play a major role in Fed decision-making.
"A too strong report could be a setback for stocks, aligning with expectations of rate cuts in the second half of 2024," said SPI Asset Management's Stephen Innes.
"If the report aligns with or falls slightly short of expectations, it may reinforce beliefs in an imminent rate cut, potentially sparking a rally. On the other hand, a significantly weaker reading could renew concerns about a looming recession.
"Hence, the fine line where the (jobs) report must land is not an especially ideal risk-reward setup."
With expectations for an early cut waning, traders are cashing in their recent gains, dealing a blow to the Nasdaq, which fell for a fifth straight day Thursday -- its worst run since December 2022 -- as the tech sector comes under pressure.
The unease seeped into Asian trade, with markets swinging between losses and gains for most of the morning.
Tokyo, Hong Kong, Shanghai, Sydney and Jakarta edged up, while Seoul, Taipei, Wellington and Manila dipped. Singapore was flat.
The yen continued to weaken on expectations the Fed will not be hiking in the first quarter, while analysts said the New Year's Day earthquake in Japan could also force the Bank of Japan to delay a tightening of monetary policy.
Tokyo - Nikkei 225: UP 0.5 percent at 33,442.62 (break)
Hong Kong - Hang Seng Index: UP 0.1 percent at 16,664.34
Shanghai - Composite: UP 0.1 percent at 2,958.47
Dollar/yen: UP at 144.71 yen from 144.61 yen on Thursday
Euro/dollar: UP at $1.0955 from $1.0952
Pound/dollar: UP at $1.2695 from $1.2682
Euro/pound: DOWN at 86.28 pence from 86.32 pence
West Texas Intermediate: UP 0.6 percent at $72.63 per barrel
Brent North Sea Crude: UP 0.4 percent at $77.91 per barrel
New York - Dow: FLAT at 37,6440.34 points (close)
London - FTSE 100: UP 0.5 percent at 7,723.07 (close)
