Marketmind: One more firework in fiery start to Q4

By Jamie McGeever

(Reuters) – A look at the day ahead in Asian markets from Jamie McGeever, financial markets columnist.

The curtain comes down on the first week of the quarter on Friday, an explosive week across all markets that still has one major firework left and which will go a long way to determining investor sentiment in the weeks ahead: the U.S. payrolls report.

Asian markets will have closed by the time the September employment report is released at 8:30 ET on Friday, but investors will have plenty data and events closer to home to offer direction before they react to payrolls next week.

A batch of data from Japan includes household spending and consumption figures, leading indicators, and the latest foreign exchange reserves.

The FX reserves will be monitored more closely than usual. Although the figures are for September, they come days after the yen’s slide below 150.00 yen per dollar sparked a sudden surge that many suspected was intervention from Japanese authorities.

But Bank of Japan money market data indicates that the yen’s jump on Tuesday was not the product of yen-buying intervention. The yen is on course for a weekly rise of around 0.5% – not much, but it would mark its best week since July.

The big policy event in Asia will be the Reserve Bank of India’s interest rate decision, and more importantly, its guidance.

The central bank is widely expected to keep key rates on hold at 6.50%, but any further liquidity withdrawal measures alone may push market yields higher, causing another increase in effective rates.

The rupee goes into the meeting trading at 83.00 per dollar, right down at August’s record low 83.45 per dollar.

The U.S. dollar eased on Thursday but if it holds its ground on Friday, at a minimum, it will chalk up its 12th weekly rise in a row. That would be a record winning streak, according to Reuters data.

On the subject of historic runs, the U.S. two-year/10-year yield curve steepened for a ninth straight day on Thursday, something not seen since at least 2012. The rise in long-dated yields has been the biggest driver of volatility and stress that have been behind the recent selloff in stocks.

But one source of relief this week has been oil prices. Crude fell another 2% on Thursday, following Wednesday’s 5.5% slump – the biggest fall in a year.

All else equal, lower energy prices cools inflationary pressures and lessens central banks’ need to tighten policy. The prospect of easier policy than previously anticipated should in turn boost investor sentiment and risk appetite.

After threatening to test $100 a barrel last month, oil has slumped almost 15% peak-to-trough in the last five days, and its year-on-year price is once again negative. That is, from a policy point of view, disinflationary.

Here are key developments that could provide more direction to markets on Friday:

– India interest rate decision

– Japan household spending (August)

– U.S. non-farm payrolls (September)

(By Jamie McGeever)