In Asia, MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS rose 1.5% to offset earlier losses with the gauge up 0.1% for the week.
Japan's Nikkei .N225 gained 1.4% but was still down 1.9% for the week. Chinese blue-chips .CSI300 rose 4% and South Korea's KOSPI .KS11 increased 2%. Software stocks jumped on Wall Street after a bullish forecast from Snowflake SNOW.N, which sent its shares up 16.6%.
Traders are bracing for the U.S. payrolls report for August due later in the day, although Waller did say he did not expect the data to deviate much from the current trend of a stable labour market. Forecasts are centred on a rise of 56,000 jobs after a shock fall of 23,000 the previous month. The unemployment rate is expected to hold steady at 4.1%.
U.S. economic data overnight showed activity in the services sector picked up pace last month with a measure of prices paid jumping to a three-year high. The Fed's "Beige Book" survey also showed economic activity edged up in recent weeks.
After the dovish comments from Waller, Treasuries rallied, led by the short-end, as the yield curve bull steepened on fading fears of imminent rate hikes. Two-year yields US2YT=RR held at 4.3348% after falling 5 basis points overnight to move further away from a 20-month peak of 4.4102%.
Ten-year yields US10YT=RR were little changed at 4.7581%, having dropped 3 basis points overnight, while 30-year yields US30YT=RR were at 5.2370% after a 2 bps fall overnight.
Investors in longer-dated bonds remain wary of inflation risks amid few signs of progress between the U.S. and Iran to end the war and reopen the Strait of Hormuz. Oil prices held near six-week highs, with Brent crude futures LCOc1 up 7% this week to $95.52 a barrel. O/R
The dollar dropped with lower yields and was fetching 99 against its major peers =USD, after skidding 0.6% overnight. It is set for a weekly drop of 0.7%.
That helped the yen to build on its gains this week as investors ramped up bets on a Bank of Japan rate hike this month. The dollar was last up 0.3% to 156.32 yen JPY=EBS, having lost 1.8% overnight.
Markets now imply a 75% chance of a September move, while a hike by October is fully priced in, raising the prospect of either a larger increase or back-to-back tightening.
"While we can't rule out another round of price checks, or intervention, it could also be pre-positioning — official or speculative — in expectation of a soft non-farm payrolls tonight and a potentially hawkish BOJ meeting in a fortnight," said Tony Sycamore, analyst at IG.
In commodity markets, gold held at $4,470 an ounce XAU= after rallying 2% overnight. It was, however, set to end the week little changed. GOL/
Waller comments ease rate-hike fears
In remarks for a Reuters NEXT Newsmaker event, Federal Reserve Governor Christopher Waller said that recent data suggested some signs of disinflation and that, if upcoming reports reinforced that trend, he would favour holding rates steady at this month's policy meeting.
Futures were quick to scale back the chance of a rate hike this month to just 50%, from about 63% a day ago. Those expectations had surged in recent sessions as a global bond rout drove long-dated yields to multi-year highs, fuelled by concerns over stubborn inflation, swelling government debt and geopolitical tensions.
"Waller is pushing back against the thrust of the argument made by Warsh last week that there is little evidence that underlying inflation has moved lower," said analysts at JPMorgan in a note.
"We believe that Chair Warsh will deliver a hike if he advocates for it. Absent his advocacy, Governor Waller’s speech reinforces our view that the bar for data to sway the data-dependent majority to hike this month remains elevated."
Asian shares and futures rise ahead of jobs data
SYDNEY, Sept. 4 (Reuters) - Asian shares tracked Wall Street higher ahead of the U.S. jobs data, while bonds found some much-needed relief after a top Federal Reserve official cooled rate-hike fears and dragged the dollar lower.
The dollar's retreat turbocharged a rally in the yen, which is set for a weekly rise of 2.3%, the best since late July when Japan and the U.S. conducted a rare joint intervention to halt a relentless slide in the Japanese currency.
European stocks are braced for a higher open, with a pan-region index STXEc1 up 0.1%. Nasdaq futures NQc1 climbed 0.3% and S&P 500 futures ESc1 rose 0.1%.
SPY•
