Nikkei Leads Asian Stocks After Weak US Jobs Eases Fed Hike Odds

Nikkei 225 led Asian shares higher on Friday after US June nonfarm payrolls rose by 57,000, below forecasts. The weaker US labour report prompted traders to scale back near-term expectations for a Federal Reserve rate increase while Wall Street was closed for US Independence Day.

The US payrolls figure was substantially smaller than expected and revisions to April and May trimmed previous gains. The unemployment rate fell to 4.2% from 4.3%, while the labour force participation rate declined to 61.5%, its lowest level since March 2021.

Futures pricing shifted to reflect a higher probability that the Fed will hold rates at its September meeting. Westpac analysts wrote that the data “weakened the case for a Fed hike in the near term.”

Asian equity benchmarks rose in thinner trading. MSCI’s index of Asia-Pacific shares outside Japan advanced about 1.3%. Japan’s Nikkei reversed early losses to finish roughly 0.7% higher. S&P 500 E-mini futures were up about 0.3% ahead of the US holiday. Overnight on Wall Street, the S&P 500 finished flat, the Nasdaq slipped 0.8%, and the Dow closed at a record high.

South Korea’s Kospi was the strongest mover in the region, climbing about 3% after a sharp selloff in AI-linked and semiconductor stocks the previous day. Gains were concentrated in chip-related names that had posted large increases earlier in the year.

Regional economic data lent support to trading. Japan’s services PMI rose to 52.2 in June from 50.0, returning to expansion. China’s private services PMI eased to 54.1 from 54.4 but remained in growth territory, with overseas demand reported to be rising at the fastest pace in 20 months.

Currency markets reflected the change in US rate expectations. The dollar index fell about 0.2% to near 100.80, while the dollar traded around 161.125 yen. Market participants remain alert to possible intervention after the yen slid to multi-decade lows.

In commodities, Brent crude gained about 0.5% to $72.12 a barrel. Gold rose around 1% as the softer dollar supported demand for bullion. Trading volumes were lighter than usual because many US market participants were offline for the holiday.

Trading in Asia was measured, with investors adjusting positions after a volatile week and responding to regional data and sector-specific moves.