Hong Kong (AFP): Asian markets struggled again Friday and the dollar held gains as rate hike expectations grew, with traders now focusing on a key US jobs report later in the day.
Oil prices rose on fading expectations for an Iran nuclear deal anytime soon, but they remained under severe pressure from a range of issues including the strengthening dollar, Covid lockdowns in China, and worries about a demand-sapping recession. Healthy readings on US factory activity, unemployment claims and private jobs creation indicated the world’s top economy remained strong despite rising interest rates and four-decade-high inflation.
But analysts said the figures were a case of “good news in bad news” as they would give the US Federal Reserve more room to keep tightening monetary policy, with officials lining up to commit to beating inflation even if that causes a recession.
Bets are increasing on a third successive 75-basis-point increase at its September meeting.
OANDA’s Edward Moya warned Fed officials could even start considering rising into 2023, with inflation data later this month becoming increasingly important.
“If the economy remains resilient over the next few months, the Fed-funds futures market might believe the Fed won’t be done tightening at the end of year,” he wrote in a commentary. “Markets might start pricing in a February rate hike as well, if pricing pressures don’t show further signs of easing with the September 13th inflation report.”
Wall Street ended with a late rally, with the Dow and S&P 500 snapping a four-day retreat, though the Nasdaq extended its losing streak. European markets fell again after record inflation figures ramped up expectations the European Central Bank will announce a big increase in costs next Thursday. Asia continued to wobble, though there were some positives.