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Asian Stocks Up as Positive U.S. Employment Data Boosts COVID-19 Recovery Outlook

Asia Pacific stocks were mostly up Friday morning after U.S. shares closed at a record high on the back of positive economic data.

China’s Shanghai Composite was up 0.27% by 10:58 PM ET (2:58 AM GMT) while the Shenzhen Component inched down 0.08%. The Caixin Services Purchasing Managers Index (PMI) for April was 56.3, above both the 50-mark indicating growth and March’s 54.3 reading.

U.S.-China tensions are also on investors’ radars after reports that U.S President Joe Biden’s administration will maintain the current limits on U.S. investments in certain Chinese companies.

Hong Kong’s Hang Seng Index rose 0.90%.

Japan’s Nikkei 225 edged up 0.17%, with April’s services PMI coming in at a better-than-expected 49.5 earlier in the day.

Meanwhile, the COVID-19 vaccines developed by AstraZeneca PLC (LON:AZN) and Moderna Inc. (NASDAQ:MRNA) could reportedly be approved as soon as May 20, with officials from the Ministry of Health, Labour and Welfare due to convene around that time.

South Korea’s KOSPI gained 0.69% and in Australia, the ASX 200 rose 0.34%.

Treasuries were steady on Friday, with the benchmark 10-year yield near the 1.57% level which is well below recently hit highs.

Global shares were also boosted by positive employment data from the U.S., with Thursday’s initial jobless claims figure coming in at 498,000. The figure, below both the 540,000 claims in forecasts prepared by and the 590,000 claims filed during the previous week, is the lowest since mid-March 2020 when COVID-19 was declared a pandemic.

Separately, nonfarm productivity also rose a better-than-expected 5.4% quarter-on-quarter during the first quarter of 2021.

Investors are now turning their attention to the U.S. employment report for April, including non-farm payrolls, due later in the day.

“With jobless claims hitting a pandemic-era low, anticipation for the full jobs picture tomorrow mounts... today’s read is another proof point that we’re one step closer to full economic recovery,” E*Trade Financial (NASDAQ:ETFC) managing director of investment strategy Mike Loewengart told Bloomberg.

While the positive data boosted investor sentiment as the outlook for the U.S. economic recovery improved, concerns lingered over the implications of a faster-than-expected recovery on government and central bank stimulus measures.

The U.S. Federal Reserve continues to maintain a dovish policy. Various officials, including Fed Chairman Jerome Powell, have insisted throughout the week that it is too soon to talk about tapering. However, it is increasingly likely that a pullback could take place in the second half of 2021 as concerns over runaway inflation also mount.

“As we see some serious momentum building on the jobs front, all eyes will be on how these plays into action taken by the Fed,” said E*Trade Financial’s Loewengart.

Concerns are also mounting that any excessive risk-taking could prompt the Fed to adjust its monetary policy even further. The central bank’s semi-annual Financial Stability Report, released on Thursday, said increasing risk appetite across a variety of asset markets is stretching valuations and creating vulnerabilities in the U.S. financial system.