HONG KONG: Asian markets were volatile in early trade on Monday, as a disappointing U.S. jobs report boosted optimism that the world’s largest economy was on a recovery track, but also raised expectations for interest rate hikes.
Friday’s much-anticipated nonfarm payrolls report showed the Labor Department sharply revised upwards for the previous three months, while also showing a surge in wage growth.
The week’s most important inflation report showed prices rising at the fastest pace in 40 years, as traders grew increasingly anxious about the Federal Reserve’s plan to rein in inflation while being careful not to jeopardize the economic recovery.
There is growing talk that officials will have to raise borrowing costs at least four times this year — some predict as many as seven.
Tighter policy, likely to begin in March, will end the era of ultra-cheap cash that helped fuel a nearly two-year market rally. That weighed heavily on stocks at the start of the year.
Bain & Company’s Karen Harris told Bloomberg Television that the Fed is in a difficult position “trying to manage the real economy where we see high inflation and a financial economy that trembles every time we talk about raising rates”.
Wall Street mostly rose, helped by a sharp rise in Amazon shares, as jobs data showed the economy remained resilient in the face of Omicron variants, supply chain disruptions and soaring prices.
The S&P 500 and Nasdaq closed higher, but the Dow fell.
Singapore, Taipei and Jakarta were also in positive territory as investors returned from the week-long Lunar New Year holiday to catch up with a generally strong week for global markets.
However, Hong Kong fell after surging more than 3% on Friday, as did Tokyo, Sydney, Seoul and Manila.
Expectations that demand will continue to improve as the world economy reopens put further upward pressure on oil prices, with a cold snap in the U.S. and continued uncertainty over the Russia-Ukraine standoff adding to the rally.
Brent briefly touched $94 for the first time since October 2014, observers said, with analysts predicting the contract, along with West Texas Intermediate, could soon top $100 despite signs of a breakthrough in Iran nuclear talks. Help curb price spikes.
“Demand for petroleum products is soaring while OPEC and U.S. shale supplies remain constrained,” said Stephen Innes of SPI Asset Management. “Having Iran re-entered the supply mix would have a significant and lasting impact on oil prices. It could It will stop prices from surging.”