The seizure of an Iranian tanker by British forces near Gibraltar was unable to boost oil prices, despite increasing geopolitical tensions (JORGE GUERRERO)

Hong Kong (AFP) – Asian markets fluctuated Friday as investors steeled themselves for the release of a crucial US jobs report that could have a major bearing on the size of an expected Federal Reserve interest rate cut.

With uncertainty over the China-US trade row put aside for now, this week has been dominated by speculation about the US central bank’s plans to address a weakening economic outlook, both at home and globally.

The jobs report is a closely watched gauge of the state of the world’s biggest economy and a below-forecast reading would ramp up hopes the Fed will announce a 50-basis-point reduction.

“Today’s US payrolls report has the potential to upset the apple cart when it comes to whether or not we can expect to see a Fed rate cut later this month, and if we do whether it will be 25 or 50 basis points,” said Michael Hewson, chief market analyst at CMC Markets UK.

And Pepperstone Group head of research Chris Weston added that “a number in line with consensus probably delivers that July cut and I think that’s what the market wants to see”. 

“If we get a really strong number, I think risk could really come off the table,” he told Bloomberg News.

The clamour for a Fed rate cut comes as central banks around the world take a more accommodative position to offset economic weakness blamed on trade uncertainty, particularly the China-US standoff.

Equities swung back and forth ahead of the jobs release, with most markets bouncing back from morning losses.

Tokyo and Shanghai each closed 0.2 percent higher while Hong Kong was flat in the afternoon.

Taipei and Seoul both finished 0.1 percent higher while Sydney, Wellington, Manila and Bangkok were also in positive territory. But Singapore, Mumbai and Jakarta edged down.

In early trade London and Paris dipped 0.2 percent while Frankfurt was off 0.1 percent.

– Oil prices struggle –

Adding to the cautious trading environment was the lack of a lead from Wall Street, which was closed for the Independence Day celebrations.

“If there is one thing financial markets hate it’s a delicate balance between risk-on and off, suggesting something will give shortly,” said Stephen Innes at Vanguard Markets.

“Over the short run, ‘risk-on’ sentiment should prevail on the back of the deluge on central banks easing. The Fed is critical to the ‘risk-on’ fever,” he said, adding that “now is the time to shift easing policy into high gear”.

Oil prices fell as traders fret over the impact of weak global growth on demand, which is overshadowing this week’s agreement by OPEC and Russia to extend their output caps.

Even the US-Iran crisis has been unable to perk up the commodity, with news that Britain had intercepted an Iranian oil tanker near Gibraltar — suspected of carrying crude to Syria — providing no support.

The US praised the move but Tehran called it an “illegal interception”, adding to geopolitical tensions.

WTI shed 1.5 percent, hit by an increase in US production, though Brent was off around 0.5 percent.

“The US is now positioned to become a net exporter and is not bound by the (OPEC-Russia) production limit agreement. This could further drive prices lower,” said OANDA senior market analyst Alfonso Esparza.

– Key figures around 0720 GMT –

Tokyo – Nikkei 225: UP 0.2 percent at 21,746.38 (close)

Hong Kong – Hang Seng: DOWN 0.1 percent at 28,774.83 (close)

Shanghai – Composite: UP 0.2 percent at 3,011.06 (close)

London – FTSE 100: DOWN 0.2 percent at 7,588.52

Euro/dollar: DOWN at $1.1267 from $1.1286 at 2100 GMT

Dollar/yen: UP at 108.03 yen from 107.82

Pound/dollar: DOWN at $1.2556 from $1.2578

West Texas Intermediate: DOWN 88 cents at $56.46 per barrel

Brent North Sea crude: DOWN 31 cents at $62.99 per barrel

New York – Closed for national holiday

Disclaimer: Validity of the above story is for 7 Days from original date of publishing. Source: AFP.