Stock futures are higher with all eyes on July jobs report

Markets in Asia-Pacific rose on Friday as investors shook off fears over China’s military exercises near Taiwan, which follow U.S. House Speaker Nancy Pelosi’s visit to the self-ruled island this week.

MSCI’s broadest index of Asia-Pacific shares outside Japan climbed 0.74%. Mainland China’s Shanghai Composite gained 0.28% and the Shenzhen Component increased 0.64%.

The Taiex in Taiwan jumped more than 2%, with chipmaker TSMC rising 2.8%.

Official data show Taiwan depends more on China than the U.S. when it comes to trade. Slightly more than 22% of Taiwan’s imports in 2021 were from mainland China and Hong Kong, compared with 10% from the U.S.

Taiwan is a democratic, self-ruled island, but China sees it as a renegade province.

— Abigail Ng, Evelyn Cheng

If Friday’s jobs report shows the U.S. economy added fewer workers in July than the previous month, it is not necessarily a sign of economic weakness, according to Brad McMillan, CIO at Commonwealth Financial Network.

“If we do see a reduction in hiring, even at the expected number, it looks much more likely to be due to a shortage of workers, rather than a sudden shock to labor demand,” McMillan said in a note. “With demand strong, what matters here is labor availability.”

— Yun Li

The Fed’s commitment to bring down inflation as well as easing recession fears have sparked a relief rally in the market. The S&P 500 is now 14.2% above its 52-week intraday low of 3,636.87 from June 17. The benchmark index is also coming off its best month since November 2020, gaining more than 9% in July.

However, some on Wall Street are skeptical that the rally can sustain for much longer. Max Kettner, chief multi-asset strategist at HSBC Bank said the comeback is “wishful thinking,” and he would need to see further repricing of rate hike expectations and another sharp drop in real yields to believe it.

Widely followed Mike Wilson from Morgan Stanley also called this rally short-lived as corporate earnings are beginning to deteriorating.

Six out of the 11 S&P 500 sectors were in the green week to date, led by consumer discretionary, which has gained 2.9%.

The most negative sector this week has been energy, which has fallen more than 8% and is on track for its worst week since June 17. The decline in energy names came amid a drop in oil prices. WTI is down over 10% this week, on pace for its worst week since April.

— Yun Li