The Australian government bonds rallied on Friday as investors were cautious ahead of US payroll report. Also, traders shifted to safe-haven buying after China's May Caixin services PMI eased to three-month low. The yield on the benchmark 10-year Treasury note which moves inversely to its price fell 4 basis point to 2.237 percent and short-term 2-year bonds yield also dipped more than 1 basis point to 1.659 percent by 05:25 GMT.
The US May Labor Department employment situation report will be released today at 12:30 GMT. We expect non-farm payrolls will increase +180k in May, on the contrary market is expecting a increase of +165k, as compared to +160k reading seen in April, alongside a decrease in the unemployment rate to 4.9 percent, investors consensus are for a 4.9 percent result. Moreover, focus will likely be paid to gains in total private employment which we expect will increase around +175k. Beyond the headline, we expect average hourly earnings will increase +0.2 percent m/m, alongside no change in weekly hours of 34.5. On balance, despite the notable weakness seen in recent months, we anticipate further improvement taking hold in the coming months as conditions gradually improve.
Today, the Chinese Caixin services PMI cooled to a three-month low at 51.2 in May, from 51.8 in April and composite PMI declined to 50.5 in May, as compared to 50.8 in the previous month. Further, business optimism slid to its lowest level this year, the data statistics body added. However, markets remained muted with the benchmark Shanghai Composite Index down 0.02 percent to 2,924.53 while the yuan remained flat at 6.58.
China’s service sector, believed as the growth engine of the economy, accounts for the bulk of the gross domestic product and is crucial to Beijing's economic transition to consumer-driven growth. It now accommodates real estate and financial services as the major components.
Yesterday, China's Caixin manufacturing PMI fell to 49.2 in May from 49.4 in April, in line with estimates and official manufacturing PMI unchanged at 50.1 in May, beating estimates for 50. Moreover, official non-manufacturing PMI fell to 53.1 in May from 53.5 in April.
Meanwhile, the benchmark Australia's S&P/ASX 200 index was trading up 0.12 percent, or 6.5 points, at 5,323.5 by 05:25 GMT.
The material has been provided by InstaForex Company – www.instaforex.com