Asian Markets React to Mixed US Jobs Report, Uncertainty Surrounds Fed Rate Hike

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Asian equities experienced fluctuations on Monday as investors digested a mixed US jobs report and deliberated the probability of another interest rate hike by the Federal Reserve (Fed).

Last week saw turbulent times for global markets, with traders becoming apprehensive due to various factors such as a US rating downgrade, increasing Treasury yields, and a lack of definitive measures to boost Chinese growth.

Despite inflation continuing to decline in the United States and certain sectors of the economy displaying signs of slowing, speculation persists that the Fed will raise rates at least once more this year.

Friday’s highly anticipated jobs report revealed that fewer new jobs were created last month compared to what was predicted, further fueling the view that the central bank may choose to remain cautious.

However, the positive news was counterbalanced by substantial wage growth, which supported the hawkish outlook for further tightening. Bloomberg reported that traders perceive a 40% chance of another rate hike before the year ends, and anticipate a total of 1.25 percentage points of rate cuts by the end of 2024.

Debate regarding monetary policy is also ongoing within the central bank. Chicago Fed boss Austan Goolsbee believes officials must exercise patience and expresses optimism that inflation can be reduced without triggering a recession. He emphasizes the importance of evaluating how long elevated borrowing costs are maintained, stating, “Holding is increasing restrictiveness in that sense.”

Contrarily, Governor Michelle Bowman suggests that policymakers may need to raise rates again to achieve stability in prices.

This week, investors will closely monitor US inflation data and jobless claims figures in order to gain a better understanding of the Fed’s plans. On Friday, Wall Street’s three primary indexes ended in negative territory after experiencing a late pullback from the morning’s rally. Asian markets struggled to start the week on a positive note, with several markets experiencing fluctuations. Tokyo remained unchanged, while Hong Kong, Shanghai, Sydney, and Wellington slipped. Conversely, Singapore, Taipei, Manila, and Jakarta saw gains.

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