* Markets under pressure going into US payrolls data
* Drop in US dollar vs yen adds to pain for Japanese shares
* Bond yields rising on risk Fed tapers stimulus this month
By Wayne Cole
SYDNEY, Dec 6 Asian markets were heading into
another trying session on Friday as speculation builds about an
imminent scaling back in U.S. stimulus, with payrolls data
looming as make or break for a move this month.
Adding to the pain for Japanese stocks was a reversal in the
dollar against the yen, and a negative for exporters. The Nikkei
has shed 3.6 percent in the last two sessions and with
futures trading at a discount a further drop was
expected at the opening on Friday.
Given the index is still up 46 percent on the year so far,
there would seem to be plenty of scope yet for profit-taking.
MSCI's broadest index of Asia-Pacific shares outside Japan
was flat after slipping 1.5 percent on Thursday.
The lead from Wall Street was again less than helpful with
the Dow Jones and the S&P 500 both ending down
That marked a fifth straight day of losses as investors
fretted about the risk the Federal Reserve will begin to taper
its monthly debt purchases of $85 billion at its policy meeting
on Dec. 17 and 18.
Crucial to that decision could be the payrolls report for
November due later Friday. The median forecast is for an
increase of 180,000 in payrolls with the jobless rate steady at
The market would tend to see anything over 200,000 as
greatly adding to the chance of a tapering this month, while a
result under 150,000 would diminish the risk.
Still, it is worth remembering that total U.S. employment is
over 136 million so the difference in a monthly rise in jobs of
150,000 or 200,000 is statistically insignificant, yet it has
the power to move markets massively.
Not helping was that Thursday's U.S. data seemed strong on
the surface but the detail was not so positive. While economic
growth was revised up to an annualised 3.6 percent for the third
quarter, all the increase came in a build up of inventories.
That led analysts to assume inventories would be run down
this quarter and thus drag on growth.
Yet the headline number was enough to send yields on the
benchmark 10-year U.S. Treasury note up to a
three-month high of 2.88 percent.
For once, the rise in yields did not lift the U.S. dollar,
in part because European yields jumped even more after European
Central Bank President Mario Draghi sounded in no hurry to take
further stimulative action.
In particular, the market was spooked when Draghi played
down the need for another long-term liquidity operation (LTRO).
Dealers had been hoping for just such an operation to ease a
liquidity squeeze over year end.
As a result yields on two-year German government debt
spiked to 21 basis points, from just 12 at the start
of the week, and took the euro higher in their wake.
Early Friday, the single currency was up at $1.3671
having finally smashed through tough resistance at $1.3620. The
next chart target was $1.3705/18, which would not be too distant
from the 2013 peak of $1.3832.
Against the yen, it edged up to 139.14, but
struggled to break above a five-year peak of 140.03 set earlier
in the week. The dollar fared worse, dropping back to 101.71 yen
and further away from the week's high of 103.37.
In commodities markets, spot gold was nursing losses
at $1,224.69 after dropping 1 percent on Thursday.
U.S. crude was up 4 cents at $97.42, still benefiting
from a drop in U.S. crude stocks. Going the other way, Brent
crude fell 84 cents to $111.04.