Asian shares, dollar soft after tepid US jobs data

By Hideyuki Sano

TOKYO (Reuters) - Asian shares were tepid and the U.S. dollar was on the defensive on Monday after data showed U.S. employers slowed their pace of hiring, while the New Zealand dollar tumbled after a food-safety scare affected dairy exports of the country’s largest company.

Japan’s Nikkei share average fell 1.2 percent while shares in South Korea, Australia and Singapore all slipped, underperforming Wall Street, which ended at record highs on Friday in part helped by expectations the U.S. Federal Reserve may delay scaling back its stimulus.

Asian shares ex-Japan eked out small gains, however, helped by Chinese stocks, which benefited from report by China‘s official Xinhua news agency that China may relax its one-child policy.

European shares are slated to track U.S. small gains on Friday. France’s CAC 40 was seen up 0.2 percent while Germany’s Dax and Britain’s FTSE were both seen gaining 0.1 percent. U.S. share futures were down 0.1 percent.

U.S. non-farm payrolls rose by 162,000 in July, more than 20,000 below a median market estimate, and a decline in the size of the workforce saw the unemployment rate fall to 7.4 percent, its lowest in more than four years.

“The data wasn’t all that clear cut. It’s like one of those days when it’s hard to call it sunny or overcast. I spent Saturday morning looking at the numbers to consider how to interpret it,” said Seiya Nakajima, chief economist at Itochu Corp.

While the data pointed to a gradual recovery, some of its details, such as fall in hourly wages, cast the declining jobless rate in a poor light and raised doubts over whether the economy has improved enough for the Fed to begin reducing bond purchases at its next meeting in September.

That saw some banks push back forecasts for when the Fed would begin tapering its $85 billion-a-month bond buying, although half of the 18 primary dealers in a Reuters poll still expect it to start next month.

U.S. 10-year T-notes traded at a yield of 2.611 percent, still way below Friday’s high of 2.749 percent, which was just below a two-year high of 2.755 percent hit in July.

U.S. interest rate futures were firm on Monday after sizable gains on Friday as traders increased bets the Fed would wait until 2015 before raising short-term borrowing costs.

That helped to cap the dollar index, which stood little changed at 81.911, having fallen 0.5 percent on Friday and coming within sight of a six-week low of 81.407 hit on July 31.

The euro bought $1.3280, flat on the day but holding on to most of Friday’s gains. The dollar slipped 0.3 percent to around 98.65 yen, down from a high around 99.95 seen late last week.

The biggest mover was the New Zealand dollar, which fell to a 14-month low after dairy exporter Fonterra, the country’s largest company, found botulism bacteria in some of its products, which prompted China to halt all milk powder imports from New Zealand and Australia.

The kiwi fell to as low as $0.7670 and last stood at $0.7781, or 0.6 percent below its levels late last week.

“It’s a pretty serious development for New Zealand given how important dairy is. But what usually happens with these food quality issues is that as details come out, people tend to feel more reassured,” said Chris Tennent-Brown, FX economist at Commonwealth Bank in Sydney.

The Australian dollar also slipped sharply to a three-year low of $0.8848, after the country’s retail sales data fell short of market forecast and reinforced expectations of further rate cuts by the Reserve Bank of Australia (RBA).

Swap rates now imply a 91 percent chance that rates will fall 25 basis points to a record low of 2.50 percent at the RBA’s policy meeting on Tuesday.

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