Asian markets drop after strong US data

by Jonathan Adams

The drop followed a decrease in all three major Wall Street indexes, as investors adjusted their expectations regarding the number of rate cuts the Federal Reserve might implement this year

Asian markets experienced a decline on Monday due to a strong US jobs report that dashed hopes of an interest rate cut, with focus now shifting to the upcoming release of crucial inflation data.

The drop followed a decrease in all three major Wall Street indexes, as investors adjusted their expectations regarding the number of rate cuts the Federal Reserve might implement this year.

The reading “didn’t necessarily amount to an ‘all-clear’ signal for the Fed, but there also didn’t appear to be anything in it that would derail its plan to cut rates”, said Chris Larkin of E*Trade from Morgan Stanley.

And SPI Asset Management’s Stephen Innes added that “the US labour market seems to be in a comfortable zone — not too hot and not too cold”. Reminiscent of Goldilocks’s ‘just right’ porridge.

Despite the better-than-expected jobs data, analysts believe that policymakers are still likely to proceed with lowering borrowing costs, especially as unemployment rates have risen. The current situation in the US labour market is seen as stable, with traders now anticipating three rate cuts this year, down from the initial projection of six. The upcoming consumer price index reading on Tuesday is eagerly awaited by traders.

In early trading, several Asian markets, including Tokyo, Sydney, Seoul, Singapore, Wellington, Taipei, and Manila, were all in negative territory.

Japanese stocks were affected by a tech sell-off and a stronger yen, while reports of a potential shift in monetary policy by the country’s central bank added to the pressure on exporters. Despite news that the economy narrowly avoided a recession in the previous year, markets remained cautious.

Hong Kong saw an extension of gains from Friday, while Shanghai fluctuated following reports of a significant increase in Chinese consumer prices. Although the data brought some positive developments for the struggling economy, challenges still persist.

Recovery in domestic demand will only be gradual, as households worry about their income and job prospects amid heightened economic uncertainty while consumer confidence remains low, said Kelvin Lam at Pantheon Macroeconomics.

Lam added: Therefore, it is too early to say China has emerged from consumer deflation from just one data point.

Disclaimer: The opinions expressed by our writers are their own and do not represent the views of Trading and Investment News. The information provided on Trading and Investment News is intended for informational purposes only. Trading and Investment News is not liable for any financial losses incurred. Conduct your own research by contacting financial experts before making any investment decisions.

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