Asian markets experienced fluctuations on Monday as traders assessed the likelihood of the Federal Reserve implementing interest rate cuts this year, following a robust US jobs report that tempered expectations for an immediate move in June.
Friday saw a rally in Wall Street’s three main indexes after news of 303,000 new jobs created in the United States for March. Investors focused on the positive implications for the economy rather than the potential effects on monetary policy.
However, analysts cautioned that the strong figures, which also indicated a decline in unemployment and sustained wage growth, could deter the Fed from implementing the three anticipated rate cuts in 2024, as previously indicated.
Market participants now await the release of minutes from the central bank’s recent meeting, along with the latest consumer price index (CPI) reading.
Saxo’s Redmond Wong noted that the CPI figures would be critical in determining whether the recent inflation surge is a lasting trend, referring to earlier-than-expected inflation figures at the beginning of the year.
Marc Chandler of Bannockburn Global Forex cautioned that there are fewer reasons to discount the employment data, as the economy continues to outpace the Fed’s long-term non-inflation growth pace.
There is increasing speculation that the Fed may not be able to execute the projected three rate cuts this year. Some suggest that if economic data remains robust, officials may face pressure to delay rate adjustments until 2025.
Asian investors struggled for direction on a mixed day, with Hong Kong, Tokyo, Sydney, Seoul, and Taipei seeing gains, while Shanghai, Singapore, Manila, and Wellington registered declines.
Additionally, geopolitical developments are being closely monitored, with talks in Cairo aimed at brokering a truce between Israel and Hamas showing progress, as reported by state-linked Egyptian outlet Al-Qahera.
However, Israel’s announcement of ongoing military preparations in Gaza’s Rafah city and Iran’s threats of retaliation against Israel following an attack on its embassy in Damascus contribute to ongoing tensions in the region.
Oil prices dipped on Monday amidst hopes for a ceasefire, but concerns about supply disruptions in the event of a broader conflict between Israel and Iran continue to support prices near five-month highs.
Gold prices retreated after reaching a new record on Friday, buoyed by expectations of rate cuts and geopolitical uncertainties.
