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- Asian shares slipped on Friday as investors braced for U.S. employment data that is expected to bolster the case for a Federal Reserve interest rate increase as early as next month. Wall Street marked modest losses after a mixed spate of earnings, as investors awaited the non-farm payrolls report later this session. On Thursday, U.S. interest rates futures implied traders saw a 58 percent probability of a rate increase in December, according to CME Group’s FedWatch program, while U.S. two-year Treasury yields hit their highest levels in 4-1/2 years. Economists expect the report to show that U.S. employers added 180,000 jobs in October, more than September’s increase of 142,000 jobs. New U.S. applications for jobless benefits last week recorded their biggest increase in eight months, but remained above the threshold associated with a healthy labour market. But based on recent comments from central bank officials, “it looks as if as long as we hit a 150-number, the Fed will think it’s consistent with labour tightening,” she said, adding that U.S. yields and futures were increasingly showing expectations for a December hike. Fed Chair Janet Yellen and New York Fed President William Dudley said this week that the U.S. was ready for higher interest rates if upcoming economic data justified them. Higher yields and rising expectations of a December rate hike lifted the dollar index .DXY, which last stood at 97.913, slightly lower than a three-month peak of 98.135 scaled overnight. Fed Chair Janet Yellen said on Wednesday that “liftoff” in interest rates in December was a live possibility, leading investors to think a rate hike will come next month unless economic indicators drastically weaken in coming weeks.
- The British pound fell 1.2 percent on Thursday, its biggest drop since late August, after the Bank of England’s governor dismissed the view it would raise interest rates shortly after the Fed. The Bank of England gave no sign on Thursday it was in a hurry to raise interest rates, predicting that inflation, now near zero, would pick up only slowly even if rates stay on hold all next year, and highlighting the increase in external risks to the UK economy over the past three months.
- Crude oil prices edged up on Friday after falling over 2 percent the previous session, with analysts saying oversupply and a strong dollar would continue to weigh on fuel markets. Analysts said that oversupply would pressure oil markets. “We have seen few signs recently indicating a change of tack in the oil markets,” said French investment bank Natixis. “Oil prices will remain under pressure as long as the surplus remains in the market,” the bank added, referring to global production being 1-2 million barrels per day above demand. “Rising speculation that the Fed will raise rates will put further downward pressure on commodity prices,” ANZ Bank said on Friday, adding that it expected U.S. crude futures to fall by 3 percent in the coming three months due to cost reductions by U.S. producers. Investors turn to Friday’s weekly U.S. oil rig count from oil services firm Baker Hughes for further indications on production trends throughout the nation. Last week, the firm reported that U.S. oil rigs fell by 16 over the previous week to 578, for its ninth consecutive weekly decline. At its current level, the domestic rig count is at its lowest since June, 2010. Since August, drillers nationwide have taken nearly 100 oil rigs offline, providing further signals that production is about to fall sharply. Overnight, U.S. crude futures fell steadily on Thursday extending losses from the previous session, as energy traders continued to digest a bearish supply report on nationwide inventory levels from the last week of October.