Asian Shares Mixed as US Job Rise Paves Away for Rate Gain
Asian shares were mixed on Monday. This was caused by strong US jobs data. It paved the way for interest rate hikes. According to China, its exports have increased by a whole number. Tokyo and Shanghai were advanced. Seoul and Hong Kong dropped. The price of oil has increased. Government data showed that US employers added more jobs in June than expected. Hence, Wall Street’s benchmark S&P 500 saw a 0.2% loss on Friday. That dampened expectations that a slowing economy could force the Fed to delay or cut back on more rate hikes to curb inflation.
Now, they seem to be considering whether to be more aggressive. The Shanghai Composite fell to 3.226.04, down below 0.1%. After China’s July exports saw a gain of 18%, this beat the forecast. The Hang Seng fell to around 20.055.39, down 0.7% overall. Meantime, the Nikkei 225 rose to 28,241.09, up 0.2% overall. The Kospi dropped to 2,482.32, down 0.3%. The S&P-ASX 200 was down 0.1% at 7.005.40.
On Wall Street, the S&P 500 fell to 4,145.19 on Friday. The Dow was down 0.2% at 32,803.47. The Nasdaq lost as much as 12,657.55. Investors fear that tightening policies to curb inflation in Europe and Asia could dampen global economic growth. Russia’s war also shook markets with Ukraine. This led to an increase in the prices of wheat, oil, and other commodities and uncertainty about the impact of Chinese anti-virus restrictions, which have hampered production and supply.
China’s exports in July increased by 18% compared to the previous year. Imports rose just 2.3%, reflecting weak global demand. The country’s global trade surplus increased to a record 101 billion dollars.
Shares and Fed
Strong US employment data last week gave Fed officials ammunition. They say the economy can withstand higher borrowing costs to reduce inflation. After the announcement that came on Friday, traders forecast the Fed to raise its benchmark interest rate by 0.75 points next month, half a point more than expected. This will cause the usual margin to triple and will be the third large increase this year. Higher interest rates should reduce inflation by reducing business activity. However, it also increases the risk of recession and job losses.
The recent spike in inflation is unusual because forecasters have blamed commodity shortages on the coronavirus pandemic rather than rapid economic growth. Wall Street had its best month for shares after 2020. This is mainly due to bond yields. Traders thought the economy would slow importantly.
In the energy markets, the price of US oil increased by 7 cents and amounted to 89.08 USD per barrel. The contract increased to $89.01 on Friday. Brent oil, the basis of international trade price, added 1 percent in London and amounted to 94.93 dollars per barrel. The dollar rose to 135.28 yen. The euro reached 1.0181 dollars.
European Stocks Rise
European shares rose after falling the most in three weeks on Friday. Investors avoided the risks of a Federal Reserve rate hike and focused on strong earnings. The Stoxx Europe 600 rose 0.7% in London. Technology stocks have led the way. Bond yields retreated. European shares fell on Friday after a drop in US jobs eased recession worries. It also hinted that the Fed would likely continue raising interest rates sharply to curb inflation. The president of the San Francisco Fed said the central bank is far from cutting rates yet.
Shares have rallied recently as earnings reports have been resilient against headwinds. Bond yields fell on fears of a recession, helping rate-sensitive and expensive sectors such as technology. Credit markets continue to be much more stressed than equities, and the Euro Stoxx 50 volatility index has fallen since January.
According to experts, the markets have been stable in recent weeks, although the jobs report may take longer. Europe continues to surprise, however, and the growth outlook remains grim. This suggests that the recent successes are unlikely until the end of the year.
