• Investors are awaiting a U.S. jobs report that could influence the Federal Reserve's decision on rate cuts.
• The dollar held onto gains after positive spending figures reduced the likelihood of a half-point easing from the Federal Reserve.
• Barclays economist Christian Keller stated that a weak jobs report would validate the narrative that the U.S. economy and labor market are on the precipice.
• The week ahead is significant for global markets, with key economic data and central bank decisions expected to shape investor sentiment and market movements.

Asian share markets began the week on a quiet note, with investors bracing for a data-packed week that will culminate in a U.S. jobs report. This report is expected to play a pivotal role in determining whether the Federal Reserve will proceed with a regular or super-sized rate cut later this month. The anticipation of this report has led to a cautious atmosphere in the market, with S&P 500 futures and Nasdaq futures remaining largely unchanged.

The dollar, however, managed to hold onto gains made on Friday after positive spending figures led markets to reduce the likelihood of a half-point easing from the Federal Reserve. Futures are fully priced for a cut of 25 basis points on September 18, implying a 33% probability of a 50 basis point cut. Furthermore, they have 100 basis points of cuts priced in by December, and 120 basis points for 2025.

The Bank of Canada is also expected to cut again on Wednesday, with markets implying a 22% chance of a 50 basis point cut. The upcoming payrolls report is crucial for the Federal Reserve. Analysts are predicting a rise of 165,000 in jobs and a dip in the unemployment rate to 4.2%.

Market Positioning and Key Economic Indicators

Barclays economist Christian Keller stated, The risks going into this crucial release seem highly asymmetric as a solid report is very unlikely to derail the September cut. He further added that a weak report would likely validate the popular narrative that the U.S. economy and labor market are on the precipice, necessitating a fast and deep cutting cycle, leading to another sharp repricing.

In addition to the jobs report, the ISM surveys, JOLTS job openings, ADP employment, trade, and the Fed's Beige Book will also be important this week. These factors have kept investors cautious, with the dollar finding support amidst the uncertainty. Asian markets mostly followed Friday's rally on Wall Street, with Japan's Nikkei up 0.5% and adding to last week's 8.7% bounce.

MSCI's broadest index of Asia-Pacific shares outside Japan barely moved, while South Korean stocks edged up 0.1%. Chinese blue chips dipped 0.6%, led by losses in real estate after a survey showed home prices growth had slowed.

Asian Market Performance and Commodity Prices

The Caixin survey of manufacturing showed a pick up to 50.4 in August, topping forecasts of 50.0. Surveys on Japan and South Korea factories both showed an improvement in activity. Cash Treasuries were untraded for the holidays, while Treasury futures were little moved. Ten-year yields stood at 3.914% after rising in the wake of Friday's inflation and spending data.

The rise in yields underpinned the U.S. dollar at 146.20 yen, having rallied 1.2% last week and it now faces chart resistance around 148.54. The euro was stuck at $1.1054, after losing 1.3% last week, with political uncertainty in Germany not helping. The firmer dollar combined with higher bond yields to pressure gold prices at $2,497 an ounce, short of its recent all-time top of $2,531.60.

Oil prices lost more ground as the market pondered the prospect of increased supply from OPEC+ in October. Brent fell 42 cents to $76.51 a barrel, while U.S. crude lost 38 cents to $73.17 per barrel.