April 05, 2023 (MLN): Asian stocks stumbled on Wednesday as Wall Street experienced a retreat amid concerns of a softening US jobs market and fears of an impending recession, as APP reported.
After weeks of optimism fueled by expectations of an earlier-than-expected tempering of interest rate hikes by the Federal Reserve, the rally took a hit as data revealed that job openings at US companies for February had fallen to their lowest level since May 2021 and below forecasts.
Analysts interpreted this as a warning sign of a declining economy, with some suggesting that the recent rally may not be sustainable given current valuations and signals from the rates markets that a recession could be looming. The bears are feeling confident that the recent rally can't keep going given valuations and how the rates markets are clearly signaling we are recession bound," commented Edward Moya, an analyst at OANDA. "The bulls see a weakening economy and the end of the Fed's tightening cycle."
The bears most likely have a stronger argument, as if we see rate cuts in the fall, that means something is really wrong with the economy. For the bulls to be right, somehow a soft landing has to emerge.
In early Asian trade, Tokyo led the losses, shedding more than one percent, with a strong yen adding to the downward pressure. Sydney and Jakarta also experienced declines, while Singapore, Seoul, Manila, and Wellington saw modest gains. However, Hong Kong and mainland Chinese markets remained closed for a holiday.
Adding to the concerns, Loretta Mester, the president of the Federal Reserve Bank of Cleveland, warned that interest rates would need to go above the current five percent in order for the central bank to gain control over inflation. This statement came despite worries about the banking sector, as two US lenders had recently collapsed due to surging borrowing costs. "Precisely how much higher the federal funds rate will need to go from here and for how long policy will need to remain restrictive will depend on how much inflation and inflation expectations are moving down," Mester stated in prepared remarks at an event in New York. "And that will depend on how much demand is slowing, supply challenges are being resolved, and price pressures are easing."
Furthermore, traders were unsettled by Jamie Dimon, the chief executive of JPMorgan Chase, who warned that the banking crisis "is not yet over" and that inflation could persist at high levels, potentially extending the period of higher interest rates.
On a different note, oil prices continued to rise, building on the previous week's surge sparked by a major output cut by major producers, with both contracts now up approximately seven percent since Friday's close.
The global economic outlook remains uncertain as markets react to mixed data and warnings of potential headwinds, leaving investors cautious and closely monitoring developments in the US jobs market, inflation, and central bank policies.
As the situation continues to evolve, market participants are anxiously awaiting further clues to determine the direction of the global economy and financial markets in the coming months.
Copyright Mettis Link News
Posted on: 2023-04-05T11:02:26+05:00
