San Francisco Frontiers - Asian markets drift lower as US jobs data looms

Markets have started the year cautiously, with the optimism that characterised most of the past three months dented by concerns about Donald Trump's presidency and the US central bank's hawkish pivot on monetary policy.

With Wall Street closed for a national day of mourning for late former president Jimmy Carter, there were few major catalysts to drive business at the end of a broadly dour week in Asia.

Tokyo, Shanghai, Sydney, Singapore, Seoul, Taipei, Wellington and Manila fell, while Hong Kong barely moved and Jakarta cautiously edged up.

Friday's non-farm payrolls report is expected to show a slowdown in jobs creation in December, though still at a healthy enough pace to suggest the labour market remains in rude health.

Still, the Fed last month indicated it will cut rates just twice this year -- down from the four previously flagged -- owing to sticky inflation.

That came as speculation began swirling that Trump's plans to slash taxes, regulations and immigration, and impose harsh tariffs on imports would reignite prices.

And several Fed officials have since lined up to warn they would be keen to take it easy on easing policy this year.

Boston Fed president Susan Collins said "considerable uncertainty" meant a slower pace of reduction would be warranted, adding that borrowing costs were in the right place for now and could be held for longer "if there is little further progress on inflation".

And Fed Governor Michelle Bowman admitted that while she backed last month's reduction, she could have been persuaded against it.

"Given the lack of continued progress on lowering inflation and the ongoing strength in economic activity and in the labour market, I could have supported taking no action at the December meeting," she said.

Meanwhile, Kansas City boss Jeff Schmid said policy could already be at its ideal zone, while his Philadelphia counterpart Patrick Harker wanted to base his decision on incoming data.

Regan Capital chief investment officer Skyler Weinand said the Fed was "worried about the incoming administration".

He told Bloomberg Television that the growing US fiscal deficit and healthy consumer spending could result in "higher interest rates for the next five to 10 years".

On currency markets the pound edged up from Thursday, when it hit levels not seen since late 2023, though it remains under pressure on worries about the UK economy amid talk the government might have to make spending cuts or hike taxes.

- Key figures around 0230 GMT -

Tokyo - Nikkei 225: DOWN 0.5 percent at 39,411.76 (break)

Hong Kong - Hang Seng Index: FLAT at 19,242.10

Shanghai - Composite: DOWN 0.2 percent at 3,205.49

Euro/dollar: UP at $1.0302 from $1.0296 on Thursday

Pound/dollar: UP at $1.2307 from $1.2293

Dollar/yen: UP at 158.19 yen from 157.96 yen

Euro/pound: DOWN at 83.71 pence from 83.75 pence

West Texas Intermediate: UP 0.4 percent at $74.19 per barrel

Brent North Sea Crude: UP 0.4 percent at $77.19 per barrel

New York - Dow: Closed

London - FTSE 100: UP 0.8 percent at 8,319.69 points (close)

X.Roberts--SFF