MSCI’s broadest index of Asia-Pacific shares outside Japan was up 0.17%, while Tokyo’s Nikkei added 0.78%
Asian shares started the week on a subdued note on Monday, while the dollar was stable as investors weighed when the U.S. Fed will start reducing rates in the wake of yet another blowout jobs report.
Oil prices dropped over 1% as Middle East tensions eased, while gold prices extended their record rally and hit a new all-time high.
MSCI’s broadest index of Asia-Pacific shares outside Japan was up 0.17%, while Tokyo’s Nikkei added 0.78%.
European stock markets looked set for a muted open, with Eurostoxx 50 futures up 0.04%, German DAX futures up 0.05% and FTSE futures 0.10% higher. E-mini futures for the S&P 500 dropped 0.10%.
Data on Friday showed U.S. job growth blew past expectations in March and wages rose at a steady pace, indicating the economy ended the first quarter on solid ground.
Resilient economic data are a double-edged sword for markets, ANZ strategists stated in a note. On the positive side, resilient growth indicates an economy far from recession, but it could also mean the Federal Reserve will keep rates higher for longer.
Markets are now pricing in a 48% probability of an interest rate reduction from the Fed in June, according to the CME FedWatch tool, down from nearly 60% a week ago, with July shaping up to be the new starting point for the eagerly awaited easing cycle.
Investors are also pricing in 62 bps of reductions this year, less than the 75 bps the Fed has projected.
Investor focus this week will be on the U.S. CPI report, which is expected to show core inflation slowing to 3.7% in March from 3.8% the previous month.
If inflation data in the next two months show a downward trend, the Fed may still be open to a rate reduction in June, said Vasu Menon, MD of investment strategy at OCBC Bank in Singapore.
But if the trend in January and February of sticky, slowing disinflation persists, then a reassessment may be in order, Menon added.
Meanwhile, China mainland stocks reopened after extended holidays from Thursday, with the blue-chip gauge down 0.45%. Hong Kong’s Hang Seng Index gained 0.33%.
