Wayne Cole

SYDNEY – Asian share market movements eased after Monday’s strong U.S. job data. However, this helped to calm concerns over the global economy and increased the possibility of an aggressive Federal Reserve tightening.

Geopolitics remained a concern as both the White House and France warned Russia that they could invade Ukraine anytime, while Emmanuel Macron was preparing for a visit to Moscow.

MSCI’s Asia-Pacific share index, which is the largest outside of Japan, fell 0.1% during early trade due to a cautious mood. South Korea was down 0.9% while South Korea experienced 0.8%.

The Chinese market returned to normal after the Lunar New Year holiday break. Both the blue-chip CSI300, and both the CSI300, were up around 2% in early trade. This was in line with last week’s gains in global equities. Flat was the, which returned to trading on Friday after the holiday break.

Both Nasdaq and Amazon.com Inc futures fell slightly after the market turmoil last week. Amazon.com Inc (NASDAQ) gained almost $200 billion, while Meta Platforms Inc, Facebook’s owner, lost nearly as much.

BofA analyst SavitaSubramanian observed that 2022 company guidance had been significantly reduced by stocks plummeting following earnings reports.

Subramanian wrote in a note, “Commentaries suggested that there were worsening labour supply shortages and supply chain problems. With a greater headwind expected to be in Q1 than Q4,” Subramanian noted. Margins will continue to be under pressure as wage costs are the most costly component of companies’ budgets.

The January payrolls report showed annual growth in average hourly earnings climbed to 5.7%, from 4.9%, while payrolls for prior months were revised up by 709,000 to radically change the trend in hiring.

“The report not only indicated that payrolls were way more than anyone could have imagined, but there was exceptional strength in earnings which has to add growing concern among Fed officials about upward pressure on inflation,” said Kevin Cummins (NYSE:), chief U.S. economist at NatWest Markets.

The January Consumer Price Reports are due Thursday. It could be that core inflation accelerates to 5.9%, which is the highest pace since 1982.

The result was that markets priced in a 1-in-3 chance that the Fed will raise rates by full 50 basis point in March. There is also the potential for rates to reach 1.5% before year-end.

This pushed two-year yields up by 15 basis points per week. It was the largest increase since late 2019. They were at 1.327% when they last stood. [US/]

The euro continued to enjoy the glow of the newly hawkish European Central Bank. Markets brought forward the probable timing for a first rate increase and sent bond yields dramatically higher.

Klaas Knot is the President of the Dutch Central Bank, and a member the ECB’s governing board. He stated on Sunday that he anticipates a significant increase in inflation during the fourth quarter.

With a 1.7% gain last week in performance, the single currency was in view at $1.1456, which is its highest level since early 2020. The technical view is that a break above $1.1482 could open the door to $1.1600 or higher.

Dollar was able to outperform the Japanese currency yen, as it still believes that the Bank of Japan won’t tighten its belt this year. After climbing 2.7% in the last week, it was at 115.27 yen. The euro rose to 132.06 yen.

Following a 1.8% drop last week, the dramatic swing in euro saw the dollar fall to 95.436.

The gold price was slightly higher at $1,808 per ounce but it has struggled to keep up with rising bond yields.

Petroleum prices reached seven-year highs due to worries about the supply caused by cold weather in the United States and political instability among large world producers. [O/R]

Another 32 cents were added to the barrel price of $92.97, and a 42-cent increase to the retail price at $91.89.