Asian shares rebounded on Monday as stronger-than-expected US jobs data supported the global growth outlook, although rising oil prices and firmer interest rate expectations kept investors cautious.
Japan’s Nikkei jumped 2.0% after losing a similar amount last week, while South Korea’s KOSPI rallied 3.0%. MSCI’s broadest index of Asia-Pacific shares outside Japan gained 0.9%.
Oil prices also moved higher after US and Iranian forces exchanged attacks on vessels in the Gulf. Brent crude rose 0.2% to US$96.45 a barrel after climbing almost 10% last week, while US crude gained 0.4% to US$91.85.
The latest rise in energy prices has added to concerns over inflation ahead of the US August consumer price index (CPI) report due on Friday. Economists expect core CPI to rise 0.2%, although a 0.3% increase remains a risk.
For the Federal Reserve, last week’s stronger payrolls report has pushed markets to price in a 58% probability of a rate hike at its 16 September meeting, rising to 70% for a move in October.
JPMorgan global head of economics Bruce Kasman expects core CPI to rise 0.21%, which he believes would be low enough for the Fed to remain on hold, at least for now.
“Central bank patience through the energy shock has been supportive of asset prices and the credit cycle,” said Kasman. “However, central banks are now on the move.”
“We forecast two more hikes from the ECB and BoJ before year-end,” he added. “There is also a strong case for the Fed to move earlier and more aggressively than our baseline forecast for a December hike.”
European markets were more cautious, with EUROSTOXX 50 and DAX futures each slipping 0.1%, while FTSE futures were flat. The European Central Bank is widely expected to raise rates to 2.75% on Thursday, with markets pricing a 75% chance of another hike to 3.0% by December.
Bond yields remained a drag on equity valuations, with the 10-year US Treasury yield near 4.784%, its highest level since late 2023. A stronger-than-expected CPI reading could push yields closer to the 5% mark.
In currencies, the dollar index was little changed at 99.135, while the euro held at US$1.1614. The dollar eased slightly to ¥156.07 after the yen gained 2.4% last week on expectations of tighter monetary policy from the Bank of Japan.
Gold was steady at around US$4,426 an ounce after finding support at US$4,282 last week.
Reuters
