Asian markets were mostly lower on Monday as a mixed jobs report eased worries about the US economy but dampened hopes for rate cuts, while political uncertainty in Europe weighed on the euro.
With the Federal Reserve meeting this week, investors are eagerly awaiting the dot plot’s updated outlook for borrowing costs, with commentators divided on how much, if any, tapering is in the works.
All three Wall Street indexes closed lower on Friday — but with the S&P 500 and Nasdaq remaining near record highs — after data showed the world’s largest economy added far more jobs than estimated last month.
The reading, which came after separate data earlier in the week that showed the labor market was finally softening, suggests there is still some way to go for the Fed to comfortably cut interest rates.
The US Fed is likely to remain on hold and reverse interest rate cut expectations
But traders took solace that the country is not headed for recession, as some had feared in light of data showing factory activity contracted for a second month in a row in May.
All eyes are now on the Fed’s policy decision on Wednesday. Bank officials are widely believed to keep borrowing costs at a two-decade high, but traders are focusing on their forecasts for interest rates this year.
The latest guidance called for three cuts, but several policymakers said they wanted to see more evidence that inflation was under control and the labor market was weakening before moving forward.
Commentators are divided on how many cuts there will be, with predictions ranging from zero to three.
“We still expect the Fed to cut rates in September, but another set of prints like (Friday’s) would probably take that off the table,” Principal Asset Management’s Seema Shah said shortly after the jobs data was released. .
US hiring is beating earlier expectations as the labor market remains strong
“The positive news, however, is that with such a strong labor market, the US economy is nowhere near recession territory.”
Asian shares struggled on Monday, with Tokyo rising but losses in Seoul, Singapore, Manila, Jakarta and Wellington.
Hong Kong, Shanghai, Sydney and Taipei were closed for public holidays.
In currency markets, the euro fell against its peers after far-right parties scored big in the European Union elections.
They finished first in France, Italy and Austria and came second in Germany and the Netherlands, according to preliminary results.
Heavy losses for French President Emmanuel Macron’s liberal party, which lost to the far-right National Rally party led by Marine Le Pen, prompted Macron to quickly call an early parliamentary vote, fueling uncertainty in the key EU member.
Keys around 02:30 GMT
Tokyo – Nikkei 225: UP 0.5 percent at 38,872.19 (break)
Hong Kong – Hang Seng Index: Closed due to holidays
Asian markets move as traders watch the important US jobs report
Shanghai – Composite: Closed for holidays
EUR/USD: DOWN to $1.0772 from $1.0805
Euro/pound: DOWN to 84.68 pence from 84.91 pence
Dollar/yen: UP to 156.92 yen from 156.71 yen on Friday
GBP/USD: UP at $1.2724 from $1.2722
West Texas Intermediate: UP 0.2 percent to $75.69 a barrel
North Sea Brent crude: UP 0.2% to $79.79 a barrel
New York – Dow Jones: DOWN 0.2 percent at 38,798.99 (close)
London – FTSE 100: Down 0.5% to 8,245.37 (close)
Source: AFP