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Stocks struggle for direction ahead of economic data

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U.S. labour market in focus before Fed's policy meeting

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Dollar soft on rate cut wagers, gold soars to new peak

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Worries about Fed's independence linger

By Ankur Banerjee

SINGAPORE, Sept 2 (Reuters) - Asian stocks edged higher

while the dollar lurked near five-week lows and gold climbed to

a record high on Tuesday, as investors girded for a slate of

economic data this week, including the crucial U.S. labour

report on Friday.

Markets widely expect the Federal Reserve to lower interest

rates later this month, pricing in an 89% chance of a 25 basis

point cut, but data this week will help investors gauge whether

the central bank could perhaps lean toward a jumbo cut.

The focus will be on Friday's U.S. nonfarm payrolls report,

which will be preceded by data on job openings and private

payrolls, providing investors and the Fed a clearer picture of

the labour market that has become the centre of policy debate.

"While an outsized 50 bps rate cut in September is not the

base case expectation currently, it cannot be ruled out

altogether if the August jobs data shows exceptional weakness,"

said Vasu Menon, managing director of investment strategy at

OCBC Bank.

"This is what the Fed did in September last year after

employment growth slowed down sharply between June and August

2024. However, the difference this time around is that the Fed

is also concerned that tariffs may fuel inflation."

The U.S. inflation report for August is scheduled to be

released on September 11, a week before the Fed's policy

meeting.

The prospect of lower borrowing costs has kept Wall Street

near record highs, while stocks in other regions have also

gained in recent weeks. On Tuesday, MSCI's broadest index of

Asia-Pacific shares outside Japan was 0.2%

higher.

Japan's Nikkei rose 0.39% after dropping more than

1% on Monday. Nasdaq futures rose 0.07% while European

futures inched higher. U.S. markets were closed on

Monday for a holiday leaving few cues for Asian markets.

China stocks have been on a tear buoyed by AI enthusiasm.

The blue-chip CSI300 index rose 0.26% on Tuesday to

hit a three-year high for the third straight session. Hong

Kong's Hang Seng index eased 0.19% in early trading after

surging 2% on Monday.

The currency market also made a tepid start to Tuesday with

the euro at $1.1706, while sterling hovered

near two-week highs at $1.3535. The yen fetched 147.31

per dollar ahead of a crucial Japanese government bond auction.

The dollar index, which measures the U.S. currency

against six others, was at 97.717, hovering near the five-week

low it hit on Monday. The yield on benchmark U.S. 10-year notes

was 2.6 basis points higher at 4.251% in early Asian

hours.

FED INDEPENDENCE

Efforts by President Donald Trump to fire Fed Governor Lisa

Cook have raised the prospect that Trump could make more dovish

appointments to the U.S. central bank that would result in

easier policy. Cook is set to file fresh arguments against her

firing on Tuesday.

Trump has criticized the Fed and its chair, Jerome Powell,

for months for not lowering rates, and recently took aim at

Powell over a costly renovation of the central bank's Washington

headquarters.

U.S. Treasury Secretary Scott Bessent said on Monday the Fed

is and should be independent but said it had "made a lot of

mistakes".

In commodity markets, gold hit a record high, benefitting

from the dollar's softness and the outlook for lower U.S. rates.

The metal rose to $3,503.32.

Oil prices rose on Tuesday as concerns about supply

disruptions grew amid an escalation of the conflict between

Russia and Ukraine. Brent crude rose 0.35% to $68.4 a

barrel, while U.S. West Texas Intermediate crude was up

1.37% at $64.89 a barrel.