Tokyo/New York: Affected by strong US employment data and the rebound in Chinese service industry activity, Asian stock markets rose to a four-month high on Friday, but the surge in U.S. coronavirus cases has put pressure on further risks.
MSCI is the most extensive index in the Asia-Pacific region except Japan. MIAPJ0000PUS rose 0.5%, reaching its highest level since late February, while Japan’s Nikkei index .N225 rose 0.4%.
The best performing Chinese stocks in the past month have continued their upward trend, with the Shanghai Composite Index. SSEC hitting a new high since April 2019.
The Caixin / Markit Service Purchasing Managers Index (PMI) shows that in June, China’s service industry grew at the fastest rate in a decade, as the relaxation of coronavirus-related lock-in measures eased consumer demand.
“Recovery in China’s domestic demand is accelerating, even though the external demand is still weak. Thus investors are shifting to domestic-demand oriented sectors,” said Wang Shenshen, senior strategist at Mizuho Securities in Tokyo.
S&P 500 futures ESv1 fell 0.1%, but due to Friday’s US Independence Day holiday closed, trading volume decreased compared to previous years.
The country’s non-farm payrolls surged by 4.8 million jobs in June due to the increase in the severely hit hotel industry, which was higher than the average expected 3 million jobs in June.
But economists pointed out that the optimistic headlines are worth vigilance.
Even after a two-month recovery from May, the US economy has only recovered more than a third of April’s historic decline of 20.787 million.
Another report on unemployment relief applications is the most timely employment data, showing that as of the week of June 27, the number of initial jobless claims in the United States has decreased by only 55,000, adjusted for seasonal factors to 1.427 million.
In the week ending June 20, after receiving the first week of assistance, the number of people receiving relief increased by 59,000 to 1.929 million.
With the proliferation of new coronavirus infections, states in the United States have postponed their recovery and, in some cases, reversed plans to reopen stores and resume activities.
COVID-19 cases have increased in more than three states in the United States, while cases in Florida have exceeded 10,000.
On the other hand, the expanded unemployment benefits will expire at the end of this month to support people who have lost their jobs due to the pandemic, although many investors believe that Congress can extend the measure.
“Back to pre-pandemic (job levels), in my view, will be a matter of years,” Danielle DiMartino Booth, CEO and chief strategist of Quill Intelligence in Dallas, TX. “With luck, it will be two years but that is likely optimistic given the number of permanent closures we’ve learned of.”
Sino-US diplomatic tensions have also cast a shadow.
The US State Department warned top US companies such as Wal-Mart (WMT.N), Apple (AAPL.O) and Amazon (Amazon.com Inc.) (AMZN.O) to safeguard the supply chain risks associated with human rights violations in Xinjiang Province in western China .
“China will keep a hard line stance towards the next year when the Chinese Communist Party will celebrate its 100th anniversary since its founding,” said Akira Takei, a bond fund manager at Asset Management One.
“Global companies can no longer have supply chains in China as they used to.”
In foreign exchange transactions, the major currencies did not change much, the euro was reported at 1.1245 US dollars against the US dollar, and the yen was reported at 107.52 US dollars against the US dollar.
Oil prices have fallen due to concerns about the resurgence of the coronavirus in the world and the world’s largest oil consumer, the United States.
Brent crude oil futures fell 0.65% to $42.86 per barrel, while US crude oil futures fell 0.66% to $40.38 per barrel.