(Bloomberg) — The effects of a rally in Treasuries spread across Asian markets Thursday, weakening the dollar and supporting the yen as investors prepared for Federal Reserve interest-rate cuts later this month.

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The yield on the 10-year Treasury note fell eight basis points Wednesday, as a slowdown in the US labor market boosted Wall Street’s bets on Fed rate cuts. The move weakened an index of dollar strength, and sent the yen sharply higher.

Asian equity futures were mixed. Contracts for Japan fell more than 1%, while those for Australia and Hong Kong were little changed. The S&P 500 and Nasdaq 100 ended Wednesday 0.2% lower as Nvidia saw its worst two-day plunge since October 2022 amid a report about the US Department of Justice sending out subpoenas as part of an antitrust probe.

Across Wall Street, economists and money managers have been scouring economic data for signs of weakness that would force the Fed to kick off an aggressive rate-cutting cycle. The moves in Treasuries were partly driven by a reading on job openings, known as JOLTS, which trailed estimates and hit the lowest level since 2021. The report comes ahead of Friday’s hotly anticipated payrolls data.

“The markets may not be as nervous as they were a month ago, but they’re still looking for confirmation the economy isn’t cooling off too much,” said Chris Larkin at E*Trade from Morgan Stanley. “So far this week, they haven’t gotten it.”

In Asia, traders will be keeping a close eye on shares of Nippon Steel Corp. after US President Joe Biden was said to block the Japanese steelmaker’s $14.1 billion takeover of United States Steel Corp., according to people familiar with the matter. Shares of US Steel closed 17% lower in New York, the biggest decline since April 2017.

Elsewhere, China is considering cutting interest rates on as much as $5.3 trillion of mortgages as authorities attempt to shore up the battered property market and economy.

How Big?

With the Fed set to begin cutting rates in a few weeks, the main question now is how big the first reduction will be. Monthly US employment data due Friday will help determine the answer. The jobs report last month stoked growth fears and Chair Jerome Powell has made it clear the Fed is now more concerned about risks to the labor market than inflation.

“Markets seem to see September as a coin flip between 25 and 50 basis points,” said Neil Dutta at Renaissance Macro Research. “I think going 25 basis points risks the same market dynamic as skipping the July meeting. It’ll be fine until the next data point makes investors second guess the decision, fueling bets the Fed is behind the curve. Go 50 when you can, not when you must.”

Story continues

In commodities, oil fell to the lowest in more than a year as persistent concerns about weakening demand overshadowed the potential for OPEC+ to delay supply increases. Meanwhile, gold erased earlier losses following the US job openings data added to signs of a cooling labor market.

Key events this week:

• Eurozone retail sales, Thursday

• US initial jobless claims, ADP employment, ISM services index, Thursday

• Eurozone GDP, Friday

• US nonfarm payrolls, Friday

• Fed’s John Williams speaks, Friday

Some of the main moves in markets:

Stocks

• S&P 500 futures were little changed as of 7:30 a.m. Tokyo time

• Hang Seng futures rose 0.1%

• S&P/ASX 200 futures were little changed

Currencies

• The Bloomberg Dollar Spot Index was little changed

• The euro was little changed at $1.1084

• The Japanese yen was little changed at 143.64 per dollar

• The offshore yuan was little changed at 7.1096 per dollar

• The Australian dollar was little changed at $0.6724

Cryptocurrencies

• Bitcoin rose 0.1% to $58,118.42

• Ether rose 0.4% to $2,463.73

Commodities

This story was produced with the assistance of Bloomberg Automation.

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