Asian equity markets are likely to face downward pressure after Wall Street struggled with choppy price action on Thursday. Concerns over more regional bank selling and mixed US data releases weighed on investor sentiment, with financials leading the declines on Wall Street. The announcement from PacWest that it was exploring strategic options, along with reports that Western Alliance may follow suit, added to the negative sentiment. The failure of the First Horizon/TD Bank merger also put pressure on the sector.
The focus of the session will be the release of the latest US job report, with the NFP report for April expected to show a rise in headline NFP by 180k, a decrease from the prior month’s figure of 236k. The unemployment rate is expected to tick up slightly to 3.6%, while wages will be closely watched to gauge inflationary pressures. The jobs report will be used to assess the Fed’s next move, whether it be to pause or engage in additional policy firming. However, analysts caution that there is a significant amount of data to be released before the June 14th FOMC meeting, and the expected and actual tightening of credit conditions will also be crucial, particularly after the recent sagas involving First Republic and PacWest.
Traders will be closely watching the USD, gold, and US short-term yields as they are highly sensitive to recent market price action around monetary policy and risk-on/off trades. These assets are expected to be core sentiment drivers before and during the data release.
