Asia markets mixed as weak US data fuels bets on imminent Fed rate cut

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The dollar hit a five-week low while Asian stocks made a lacklustre start to the trading session on Thursday, after weaker-than-expected economic data cemented expectations the Federal Reserve will cut interest rates at its meeting next week.

The Nikkei 225 rose 0.8 per cent, while MSCI's broadest index of Asia-Pacific shares outside Japan was trading down 0.1 per cent, weighed down by declines in Korea and New Zealand. S&P 500 e-mini futures were little changed, as momentum from US markets overnight petered out in Asia.

Stocks on Wall Street advanced on Wednesday led by small-cap companies, as the Russell 2000 index jumped 1.9 per cent and the benchmark S&P 500 rose for a second day. The gains came after US private payrolls data posted their biggest drop in more than two-and-a-half years.

Meanwhile, a separate survey from the Institute for Supply Management showed its measure of services sector employment contracted in November, with the subindex of prices paid falling to a seven-month low.

"That move aligns with our view that the recent uptick in supercore inflation is likely to subside, paving the way for a resumption of disinflation in 2026," said ANZ economist Henry Russell on a podcast.

"We remain of the view that it is appropriate for the Fed to continue to cut interest rates to respond to downside labour market risks," he said, adding the bank expects a 25 basis points cut at next week's meeting and further easing next year.

Fed funds futures are pricing an implied 89 per cent probability of a 25-basis-point cut at the US central bank's next meeting on December 12, compared to a 83.4 per cent chance a week ago, according to the CME Group's FedWatch tool.

The US dollar index, which measures the greenback's strength against a basket of six currencies, was last down 0.4 per cent at 98.878, falling for a ninth consecutive session to its lowest level since October 29.

The yield on the US 10-year Treasury bond was last steady at 4.0749 per cent, after the Financial Times reported on Wednesday that bond investors have expressed concerns to the US Treasury that Kevin Hassett, a candidate to become the chair of the Federal Reserve next year, could aggressively cut interest rates to align with President Donald Trump's preferences, citing several people familiar with the conversations.

The Chinese yuan held steady in offshore trading in Hong Kong after hitting its strongest level against the US dollar in more than a year on Wednesday, with the greenback falling to its lowest against the renminbi since October 2024. It was last trading flat at 7.056 yuan.

The Australian dollar strengthened 0.1 per cent after official data showed Australian household spending surged by the most in almost two years in October, while the country's goods trade surplus widened by more than expected as exports of gold climbed for a second month.

Japanese chip manufacturers in the AI supply chain advanced after Reuters reported Trump met with chip giant Nvidia's CEO Jensen Huang on Wednesday to discuss export controls, citing a source familiar with the matter. Tokyo Electron gained 0.7 per cent.

Precious metals continued to advance their recent hot streak. Gold was 0.2 per cent higher at $4,213.38 per ounce, while silver was trading up 0.1 per cent at $58.5415 per ounce, extending gains that saw the metal hit a record high of $58.98 on Wednesday into a ninth consecutive day.