Jobs Data Raises Likelihood Of Fed Rate Hike, Lowering Asian Shares

(CTN News) – After the US jobs data indicated a tight labour market, the dollar started the week higher on expectations that the Federal Reserve will again raise interest rates next month.

The MSCI Asia-Pacific Index outside Japan grew by 0.14%, while the Nikkei gained 0.5%. The Australian, Hong Kong, and European stock markets will be closed for Easter.

In the E-mini futures market, the S&P 500 was flat.

There was a 0.2% decline in China’s bluechip CSI300 Index on Monday, while nearly a 0.3% fall in the Shanghai Composite Index.

The Labor Department reported on Friday that nonfarm payrolls rose just short of the 239,000 expected by economists surveyed by Reuters.

Despite slowing wage growth, the US central bank’s 2% inflation target remained too high despite the report showing wage gains slowed.

According to Mansoor Mohi-uddin, chief economist at the Bank of Singapore, the labour market is still too tight for the Fed to lower inflation to its 2% target without further interest rate hikes.

It is anticipated that last month’s failed US banks will force the Fed to cut rates, but officials warn that sticky inflation will make policy easing unlikely this year.”

According to CME FedWatch, market expectations for a 25 basis point Fed rate increase in May 2-3 are 66%.

The Fed’s fight against inflation will now be shaped by the inflation report due on Wednesday.

Earlier this week, the central bank released the minutes of its last meeting in March. Due to recession fears, investors are betting that the tumult in the banking system caused by the sudden collapse of Silicon Valley Bank in March will tighten credit conditions.

The Fed is increasingly expected to cut rates in the second half of the year in order to prevent an economic downturn. There is a disconnect between market expectations and the Fed’s likely path.

Citi strategists say high inflation and a still-strong labour market should keep cuts at bay.

“However, persistently too-high inflation will likely lead to three more 25 basis point hikes.” Citi expects three more hikes this year.

US Treasury yields on two-year notes, which typically move in tandem with interest rate expectations, rose 13 basis points to 3.951%, while yields on ten-year notes increased 8.8 basis points to 3.378%.

The gap between two- and 10-year Treasury notes, considered an indicator of economic expectations, was at -57.7 basis points on the US Treasury yield curve.

On the currency market, the dollar index rose 0.118% to 102.14, measuring the value of the US dollar against six major peers.

EUR/USD traded up 0.05% to $1.0902, while GBP/USD traded up 0.02% to $1.2416.

With the new governor Kazuo Ueda taking over from Haruhiko Kuroda, the yen depreciated 0.32% against the greenback at 132.55 per dollar.

The inaugural news conference for Ueda, whose term began on Sunday, is scheduled for 1015 GMT on Monday.

The spot price of gold fell 0.5% to $1,998.53 an ounce, while US gold futures declined 0.27% to $2,006.50.

US crude rose 0.09% to $80.77 per barrel and Brent rose 0.07% to $85.18.

SEE ALSO:

US Shale Giant Exxon Considers Acquisition