Futures Sharply Higher Overnight After Weak US Data

In post-Tokyo trade, JGB futures are sharply higher, closing +42 compared to settlement levels, after US tsys yields and US equities plunged after weaker-than-expected ISM manufacturing and jobless claims data. This comes ahead of US Non-Farm Payrolls data later today.

• Initial jobless claims were notably higher coming in at 249k vs 236k. ISM Mfg was 46.8 vs 48.58. The largest miss was employment which came in at 43.4 vs 49.2 est.
• The markets read the reports as more evidence of a slumping economy, with the downdraft in the ISM employment component as a harbinger of an "unwelcome" decline in employment that Chair Powell said would be a condition for a rate cut.
• US OIS pricing softened a touch with the market fully pricing in one 25bps cut for September and a cumulative 82bps of cuts into year-end.
• (Bloomberg) -- Most Bank of Japan watchers are reassessing the trajectory of interest rates and bringing forward their forecasts after Governor Kazuo Ueda’s hawkish messaging Wednesday and his earlier-than-expected rate hike. (See link)
• Conversely, some commentators believe inflation momentum will stay sluggish, and another rate hike by December is not guaranteed. (See MNI BoJ Review here)
• Today, the local calendar will see Monetary Base data alongside BoJ Rinban Operations covering 1-10-year JGBs. After yesterday’s JGB taper announcement, tomorrow’s operations will likely garner more market interest.