January 08, 2024 (MLN): Asian markets stumbled out of the gates Monday, extending last week's grim start to the year after the forecast-busting US jobs report further dampened hopes for an early interest rate cut, as APP reported.
The keenly awaited non-farm payrolls data Friday showed the world's number one economy remains resilient despite interest rates sitting at a two-decade high and inflation still well above the Federal Reserve's target.
However, they dealt another blow to expectations the central bank will begin to normalize monetary policy in the next few months.
Equities ended 2023 with a surge as traders bet on a string of reductions this year thanks to falling inflation and a softening of the labor market.
But the release of minutes last week from the Fed's December meeting showed decision-makers were happy to keep rates elevated for some time to make sure they have prices under control.
Policymakers have signaled 75 basis points of cuts this year, but markets have priced in as much as 150 points, leaving investors open to disappointment.
"The first week of 2024 brought contradictory data signals," said Barclays economists including Christian Keller.
"Solid US jobs growth, cautious Fed minutes and a still robust US economy raise doubts about markets' aggressive Fed rate-cut expectations."
However, a sharp slowdown in the key services sector provided some solace for investors as it suggested the economy was slowing, giving the Fed wiggle room.
Bloomberg said swaps traders were still eyeing about 140 basis points of easing this year, with about a two-thirds chance of a March move.
