Asian shares slipped on Monday, with Chinese markets logging moderate losses after they reopened from a weeklong holiday.
The declines followed yet another dismal end to the week on Wall Street as a strong U.S. jobs report added to worries the Federal Reserve might consider the higher-than-expected hiring data as proof the economy hasn’t slowed enough to get inflation under control. That might mean still more hefty rate hikes that could make a recession more likely.
A U.S. consumer prices report on Thursday will be one of the biggest factors for markets this week. Investors also are awaiting the latest updates on how companies are dealing with higher prices and interest rate hikes.
Markets were closed Monday in Tokyo, Taiwan and South Korea. The Hang Seng in Hong Kong fell 2.5% to 17,298.32 while the Shanghai Composite index shed 0.4% to 3,012.58. Bangkok's SET lost 0.6% and India's Sensex gave up 1.2%.
The dollar rose to 145.44 Japanese yen from 145.34 late Friday, adding to pressure on Japan's central bank to counter the yen's prolonged slide by adjusting its policy of keeping its benchmark interest rate below zero to fend off deflation.
Prices have been rising in Japan, pushed higher mainly by global inflation and surging costs for oil and gas, but the Bank of Japan has stuck to its ultra-loose monetary policy while the Fed has pressed ahead with sharp rate hikes. The higher expected returns have pushed the dollar higher against the yen.
On Friday, the S&P 500 fell 2.8% to 3,639.66. It ended with a 1.5% gain for the week, its first weekly gain in four weeks. The Dow Jones Industrial Average skidded 2.1% to 29,296.79. The Nasdaq tumbled 3.8% to 10,652.40. The Russell 2000 index fell 2.9%, to 1,702.15.
The government report showing employers hired more workers last month than economists expected might clear the way for the Fed to continue hiking interest rates aggressively, something that risks causing a recession if done too severely.
Employers added 263,000 jobs last month. That’s a slowdown from the hiring pace of 315,000 in July, but it’s still more than the 250,000 that economists expected.
Stocks have tumbled over 20% this year from record highs this year on worries about inflation, interest rates and the possibility of a recession.
The major indexes managed to notch a gain for the week, thanks to a powerful but short-lived rally Monday and Tuesday after some investors squinted hard enough at some weaker-than-expected economic data to suggest the Fed may take it easier on rate hikes. But Friday’s jobs report may have dashed such hopes for a “pivot” by the Fed. It's a pattern that has been repeated several times this year.
By hiking interest rates, the Fed is hoping to starve inflation of the purchases needed to keep prices rising even further. The Fed has already seen some effects, with higher mortgage rates hurting the housing industry in particular. But if the rate hikes go too far, that could squeeze the economy into a recession. In the
Crude oil, meanwhile, had its biggest weekly gain since March. Benchmark U.S. crude jumped 4.7% to settle at $92.64 per barrel Friday. Brent crude, the international standard, rose 3.7% to settle at $97.92.
Oil prices have surged because big oil-producing countries have pledged to cut production in order to keep prices up. That should keep the pressure up on inflation, which is still near a four-decade high but hopefully moderating.
On Monday, the U.S. benchmark fell 97 cents to $91.67 per barrel in electronic trading on the New York Mercantile Exchange. Brent crude gave up $1.02 to $96.90 a barrel.
Beyond higher interest rates, analysts say the next hammer to hit stocks could be a potential drop in corporate profits. Companies are contending with high inflation and interest rates eating into their earnings, while the economy slows.
The euro was unchanged at 97.36 U.S. cents.
