TOKYO, RAW – Asian share markets eased on Monday after stunningly strong US jobs data soothed concerns about the global economy but also added to the risk of an aggressive tightening by the Federal Reserve.
Geopolitics also remained a worry as the White House warned Russia could invade Ukraine any day and French President Emmanuel Macron prepared for a trip to Moscow.
The cautious mood saw MSCI’s broadest index of Asia-Pacific shares outside Japan dip 0.1 per cent in early trade. Japan’s Nikkei fell 0.4 per cent and South Korea 0.6 per cent.
Both S&P 500 futures and Nasdaq futures were little changed, after last week’s market turmoil saw Amazon.com Inc gain almost $US200 billion ($A283 billion) while Facebook-owner Meta Platforms Inc lost just as much.
BofA analyst Savita Subramanian noted company guidance for 2022 had weakened significantly with most stocks falling following earnings reports.
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“Commentaries suggested worsening labour shortages and supply chain issues, with a bigger headwind expected in Q1 than in Q4,” Subramanian said in a note.
With wages being the biggest cost component for companies, margin pressure was set to continue.
The January payrolls report showed annual growth in average hourly earnings climbed to 5.7 per cent, from 4.9 per cent, while payrolls for prior months were revised up by 709,000 to radically change the trend in hiring.
“The report not only indicated that payrolls were way more than anyone could have imagined, but there was exceptional strength in earnings which has to add growing concern among Fed officials about upward pressure on inflation,” said Kevin Cummins, chief US economist at NatWest Markets.
Consumer price figures for January are due on Thursday and could well show core inflation accelerating to the fastest pace since 1982 at 5.9 per cent.
As a result, markets moved to price in a one-in-three chance the Fed might hike by a full 50 basis points in March and the real prospect of rates reaching 1.5 per cent by year end.
That sent two-year yields up 15 basis points for the week, the biggest rise since late 2019, and they were last standing at 1.31 per cent.
In currency markets, the euro continued to bask in the glow of a newly hawkish European Central Bank as markets brought forward the likely timing of a first rate rise and sent bond yields sharply higher.
Klaas Knot, the Dutch Central Bank President and a member of the ECB’s governing council, said on Sunday he expects a hike in the fourth quarter of this year.
The single currency was taking in the view at $US1.1456 ($A1.6206) , having shot up 2.7 per cent last week in its best performance since early 2020. Technically, a break of resistance around $US1.1482 ($A1.6243) would open the way to $US1.1600 ($A1.6410) and higher.
The dollar fared better on the Japanese yen as the market still sees little chance the Bank of Japan will tighten this year. It was steady at 115.27 yen, while the euro was up at 132.06 yen having climbed 2.7 per cent last week.
The wild swing in the euro left the US dollar index down at 95.436, after shedding 1.8 per cent last week.
Gold was a shade firmer at $US1,808 ($A2,558) an ounce, but has been struggling in the face of higher bond yields.
Oil prices were up near seven-year highs amid concerns about supply given by frigid US weather and ongoing political turmoil among major world producers.
Brent added another 32 cents to $US92.97 ($A131.52) a barrel, while US crude rose 42 cents to $US91.89 ($A129.99).