Asian equities at half mast, the dollar encouraged by the risk of American interest rate

FILE PHOTO – Pedestrians are reflected in a window in front of a chart displaying share prices at the Australian Securities Exchange (ASX) in Sydney, Australia, February 9, 2018. REUTERS/David Gray

SYDNEY, Aug 8 (Reuters) – Asian stock markets were mostly weaker on Monday and the dollar remained firm after a stunning U.S. payrolls report pushed back talk of a recession, but was also strengthened the case for larger rate hikes.

Markets quickly priced in a roughly 70% chance the Federal Reserve would raise rates by 75 basis points in September, pushing two-year yields up 20 basis points on Friday and further inverting the curve. Read more

The hit data only raised the stakes for July’s U.S. consumer price report due Wednesday, which could see a slight pullback in overall growth, but likely a further acceleration in inflation. underlying inflation.

“Despite sluggish growth and an expected drop to a 0.2% m/m CPI gain in July, the Fed will likely raise policy rates by 75 basis points at its September meeting,” Bruce said. Kasman, head of economic research at JPMorgan.

“The key question is whether she will decide that a significant rise in the unemployment rate is necessary to achieve her goals,” he warned. “If it does, its rate forecast will rise significantly, alongside the message that it will likely prove less sensitive to near-term growth disappointments.”

Risk haunted equity markets with S&P 500 and Nasdaq futures both down 0.2%.

MSCI’s broadest index of Asia-Pacific stocks outside Japan (.MIAPJ0000PUS) fell 0.5%, after three sessions of gains. The Japanese Nikkei (.N225) was flat and the South Korean KOSPI (.KS11) fell 0.2%, while the Chinese blue chips (.CSI300) fell 0.1%.

EUROSTOXX 50 futures fared better and gained 0.4%, while FTSE futures rose 0.2%.

There was little obvious market reaction to the news that the US Senate on Sunday passed a $430 billion bill to tackle climate change after some tax compromises in the deal. . Read more

“The changes appear unlikely to substantially alter the net fiscal impact of the legislation, which continues to appear to be below 0.1% of GDP for the next few years, as new spending and new taxes roughly offset “said Goldman Sachs analysts. .

THE EXCEPTIONAL DOLLAR

Two-year Treasury yields rose to 3.25%, 40 basis points above 10-year yields.

The bonds also got a safe haven offer amid unease over Beijing’s saber-rattling of Taiwan as China conducts four days of military exercises around the island. Read more

Chinese data released over the weekend showed exports unexpectedly picked up in July with an 18% gain, while imports lagged with a rise of just 2.3%. Read more

The jobs boom combined with the jump in yields supported the US dollar, which rose to 106.640 against a basket of currencies that gained 0.8% on Friday.

“This key data point is a million miles away from a current recession, both on a job change basis and unemployment levels,” said Alan Ruskin, global head of G10 FX strategy at Deutsche. Bank.

“Data like this will fuel any thinking about ‘American exceptionalism’ and is very positive for the USD against all currencies.”

The dollar held at 135.27 yen after jumping 1.6% on Friday, while the euro struggled at $1.0173 and not far from chart support around $1.0095.

The single currency was not helped by news that Moody’s had downgraded Italy’s outlook to negative as the resignation of Prime Minister Mario Draghi rocked the country’s political landscape. Read more

The dollar’s rise was a setback for gold, although it managed to rebound from lows hit on Friday to settle at $1,773.

Oil prices continued their recent decline after suffering the worst week since April on concerns about stalled global demand as central banks continue to tighten.

Brent fell 11 cents to $94.81, while U.S. crude fell 13 cents to $88.88 a barrel.

Editing by Sam Holmes and Jacqueline Wong

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