HONG KONG – (AFP) In early trade on Monday, Asian markets wavered as a forecast-busting US employment data bolstered optimism that the world’s largest economy was well on its way to recovery while also raising interest rate rise expectations.
The Labor Department substantially revised up the previous three months’ readings in the much-anticipated non-farm payrolls statistics on Friday, suggesting a wage growth explosion.
With crucial inflation figures due this week expected to show prices rising at a rate not seen in four decades, traders are growing increasingly concerned about the US central bank’s plans to bring them under control while without jeopardising the recovery.
There is growing speculation that regulators will have to raise borrowing charges at least four times this year, with some expecting as many as seven.
The shift to tighter policies, which is expected to begin in March, would bring an end to the period of ultra-low interest rates, which has fueled an almost two-year market run. And this has weighed heavily on equities at the start of the year.
The Fed is in a tricky position, “trying to manage the actual economy, where we have that scorching inflation, and the financial economy, which quivers every time we speak about rate hikes,” according to Karen Harris of Bain & Co.
With the jobs report indicating that the economy has stayed resilient in the face of the Omicron variation, supply chain snarls, and increasing costs, Wall Street climbed mostly, aided by a pounding rise in Amazon.
The S&P 500 and Nasdaq finished higher, but the Dow fell.
When investors returned from their week-long Lunar New Year vacation to play catch-up with a mostly bullish week across global markets, while Singapore, Taipei, and Jakarta were also up.
However, Hong Kong fell after rising more than 3% on Friday, and Tokyo, Sydney, Seoul, and Manila also fell.
Expectations that demand would continue to rise as the global economy reopens contribute to the gains, with a cold spell in the United States and lingering anxiety over the Russia-Ukraine dispute contributing to the gains.
Brent briefly surpassed $94 for the first price since October 2014, and experts expect the contract, as well as West Texas Intermediate, will top $100 shortly, while evidence of a breakthrough in Iran nuclear talks, observers say, might help halt the advance.
“Demand for petrol-based products is growing, but OPEC and US shale supply remain tight,” SPI Asset Management’s Stephen Innes said. “Reintroducing Iran into the supply mix would have a huge and long-term influence on oil prices.” It would very certainly bring the soaring to a halt.