Asian shares tick up ahead of US payrolls test; Trump's tax bill in focus

Asian shares edged higher on Thursday as investors braced for a key US jobs report that may justify imminent rate cuts by the Federal Reserve and waited on the passage of a massive US tax and spending bill in Congress.

Wall Street climbed overnight to close at new record highs after President Donald Trump announced that the US has struck a trade deal with Vietnam, including a 20 per cent tariff on exports to the US That fuelled hopes that more deals will be forthcoming, with negotiations underway for a trade agreement with India.

The MSCI's broadest index of Asia-Pacific shares outside Japan advanced 0.2 per cent to hover just below a near four-year top. Japan's Nikkei was flat.

China's blue chips edged up 0.2 per cent, while Hong Kong's Hang Seng index fell 0.6 per cent after data showed China's services activity expanded at the slowest pace in nine months in June.

Both Nasdaq futures and S&P 500 futures were little changed in Asia [.N]

Investors were waiting for Trump's massive tax and spending bill to pass the House of Representatives for possible final approval. The bill is expected to add $3.3 trillion to the national debt, slash taxes and reduce social safety net programs.

The main risk event for markets will be the US payrolls figures due later in the day. Analysts are forecasting a rise of 110,000 in June with the jobless rate ticking up to 4.3 per cent but the stakes are high after a private sector payrolls report surprised with the first fall in over two years.

The resilience of the labour market is a major reason the majority of Federal Reserve members say they can afford to hold off on cutting rates until they can gauge the real impact of tariffs on inflation.

"These labour market indicators warn of the risk that the unemployment rate could spike to 4.4 per cent, the highest since October 2021," said Tony Sycamore, analyst at IG.

"This would quickly increase the probability of a July Fed rate cut to around 70 per cent."

Futures imply just a 25 per cent probability for a rate cut this month from the Fed, which has not eased policy at all this year, drawing the ire of Trump who reiterated his call on Wednesday for Chair Jerome Powell to resign.

The Treasuries market was tense before the data as a weak jobs report would send yields sharply lower. Ten-year Treasury bond yield slipped 2 basis points to 4.265 per cent on Thursday, while two-year yields eased 2 bps to 3.77 per cent.

The dollar is again under pressure, having caught some relief overnight. Concerns about the Fed's independence in the wake of Trump's criticism have driven the dollar to its lowest against its peers in over three years.

Trump, who said rates should be cut to 1 per cent from the current Fed benchmark rate of 4.25 per cent to 4.50 per cent, has repeatedly railed against Powell for not lowering borrowing costs since his return to the White House in January.

The euro inched up 0.1 per cent to $1.1807, just a whisker away from a nearly four-year top of $1.1829 hit on Tuesday, while sterling added 0.1 per cent, recovering a steep 0.8 per cent fall overnight, as fears about the future of its finance minister Rachel Reeves eased.

Investor anxiety over UK finances after the British government's reversal on welfare reforms caused gilt yields to jump overnight, up nearly 23 basis points at one point, the most since October 2022.

In commodities markets, oil prices were slightly lower after jumping 3 per cent overnight as Iran suspended cooperation with the UN nuclear watchdog. US crude futures slipped 0.4 per cent to $67.20 a barrel while Brent was at $68.84 per barrel, also 0.4 per cent lower on the day.

Gold prices eased 0.4 per cent to $3,342 an ounce.