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(Bloomberg) — Asian stocks are set to follow Wall Street higher after Friday’s jobs print indicated a strong US economy. China reopens after a two-day holiday.

Equity futures in Australia, Japan and Hong Kong all rose. Contracts for US stocks edged higher in early Asian trading after both the S&P 500 and Nasdaq 100 indexes advanced over 1% on Friday. 

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Treasury yields surged as traders dialed back the prospect of steep Federal Reserve rate cuts this year following strong US payrolls data. The unemployment rate edged lower to 3.8%, wages grew at a solid clip, and workforce participation rose, underscoring the strength of a labor market that’s driving the economy.  

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“Reasons to dismiss the employment data are becoming thinner” and lends support to the re-acceleration hypothesis and an extension of US exceptionalism, said Marc Chandler, chief market strategist at Bannockburn Global Forex. “The economy is still growing faster than what the Fed regards as the long-term non-inflation pace.”

In Asia, traders will be keeping a closer eye than usual on China’s daily yuan reference rate as markets reopen from a holiday. Investors will be looking for signs of official pushback after the currency weakened toward a no-go area last week. The fixing may signal whether Beijing will support the currency more vigorously or allow a moderate depreciation.

What China “discovered is that there was a heck of a lot more depreciation and selling pressure under the surface than they probably anticipated,” said Richard Franulovich head of foreign-exchange strategy at Westpac Banking Corp. “This is what happens periodically when you have a managed currency.”

Focus will soon shift to US March inflation data due mid-week. Prices may stay above the Fed’s target band, as first quarter corporate earnings season gears up with results from banks including JPMorgan Chase & Co. and Citigroup Inc. due on Friday.

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Stock bulls are starting to hedge their exposures as Fed rate cuts are pared and questions over how far the rally may go. Cboe Volatility Index, known as the VIX, touched the highest since November last week as the benchmark S&P 500 Index suffered its first weekly loss in three weeks. 

Elsewhere, New Zealand’s central bank, the first to hike in the post-Covid tightening cycle, is expected to push back against easing bets when it delivers it decision this week. Meanwhile, the European Central Bank is likely to keep its key rate unchanged as traders eye rate cuts within months. Minutes of the last meeting suggested a June easing is likely, while Governing Council member Yannis Stournaras last month said four cuts are possible this year.  

“We have quite likely witnessed the opening act in what may turn out to be a new era for monetary policy in which the ECB will take the lead,” said Erik F Nielsen, chief economics advisor at UniCredit Group. “Based on existing economic data, i.e. if purely ‘data dependent’, the Fed could easily end up cutting rates only once this year, if at all, while – if purely ‘forward-looking’ – the ECB could easily justify four (if not five) rate cuts this year.”

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In commodities, oil retreated after six straight sessions of advances. Gold also declined after surging to record prices last week.

Key events this week: 

• Philippines rate decision, Monday
• Israel rate decision, Monday
• Germany industrial production, Monday
• US Treasury Secretary Janet Yellen meets with PBOC Governor Pan Gongsheng, Monday
• Australia consumer confidence, Tuesday
• China aggregate financing, money supply, new yuan loans, Tuesday
• New Zealand rate decision, Wednesday
• South Korean parliamentary elections, Wednesday
• Brazil CPI, Wednesday
• US FOMC minutes, wholesale inventories, CPI, Wednesday
• Canada rate decision, Wednesday
• China PPI, CPI, Thursday
• Eurozone ECB rate decision, Thursday
• New York Fed President John Williams, Boston Fed President Susan Collins speak, Thursday
• Japan industrial production, Friday
• China trade, Friday
• South Korea jobless rate, rate decision, Friday
• Germany CPI, France CPI, Spain CPI, Friday
• Argentina CPI, Friday
• Citigroup, JPMorgan and Wells Fargo due to report results, Friday

Some of the main moves in markets:

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Stocks

• S&P 500 futures rose 0.1% as of 8:07 a.m. Tokyo time
• Hang Seng futures rose 0.3%
• S&P/ASX 200 futures rose 0.5%

Currencies

• The Bloomberg Dollar Spot Index was little changed
• The euro was little changed at $1.0832
• The Japanese yen was little changed at 151.67 per dollar
• The offshore yuan was little changed at 7.2514 per dollar
• The Australian dollar was little changed at $0.6574

Cryptocurrencies

• Bitcoin was little changed at $69,252.16
• Ether rose 0.8% to $3,427.1

Bonds

• Australia’s 10-year yield advanced eight basis points to 4.18%

Commodities

• West Texas Intermediate crude fell 1% to $86.08 a barrel
• Spot gold fell 0.8% to $2,312 an ounce

This story was produced with the assistance of Bloomberg Automation.

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