Asia markets mostly up on US jobs news but inflation fears linger

 (Photo by Behrouz MEHRI / AFP)

HONG KONG  – A forecast-busting US jobs report and the Senate’s approval of Joe Biden’s huge stimulus package helped push most Asian equities higher Monday, while Brent crude broke past $70 for the first time in almost two years after an attack on energy facilities in Saudi Arabia at the weekend.

Traders were given a stellar lead from Wall Street, where all three main indexes surged following news that the world’s top economy created 379,000 jobs in February, reaffirming the view that it is on track for a strong recovery helped by the rollout of vaccines and easing of lockdowns.

The report came just ahead of senators passing Biden’s $1.9 trillion rescue plan, setting it up to be signed off by the president by the end of the week.

However, the news added to fears about soaring inflation that could force the Federal Reserve to wind back the ultra-loose monetary policies that have been a key driver of a year-long equity market rally.

“The US federal government and the Federal Reserve seemed to have learnt something from their attempts to reheat the economy after the great financial crisis,” said David Kelly, at JP Morgan Asset Management.

“The economy is already surprisingly warm and, with the help of very aggressive policy, is likely to heat up quickly from here. However, the critical question remains whether they have the skill and discipline to turn the policy temperature down to a simmer before inflation, and not just the economy, comes to a boil.”

Tokyo, Seoul and Jakarta all rose while Sydney, Singapore and Taipei put on more than one percent each. Shanghai was also well up after figures at the weekend showed Chinese exports soared more than expected in January and February.

However, Hong Kong, Wellington and Manila were in the red.

Oil prices extend rally

While the outlook for the global economy is for a strong rebound from last year’s recession, there is a growing worry about soaring prices, with benchmark US 10-year Treasury bond yields continuing to rise. Yields rise as bond prices fall, and investors have been rushing out of them as inflation would eat into their returns over time, sparking the sell-off in world markets.

And observers say markets are worried that the Fed is reacting too slowly, with strategist Louis Navellier saying at the weekend that traders are worried the central bank may not have enough firepower to control the surge in yields.

Fed boss Jerome Powell “keeps talking about how inflation is transitory and may not persist”, he said. “This is the real problem. Wall Street sees higher crude oil prices and Treasury yields, while Powell is essentially in denial about inflation, which does not inspire investor confidence.”

Crude prices, already rallying on expectations that the global recovery will fan a surge in demand, jumped more than two percent Monday — having climbed around four percent Friday — after a missile and drone attack on Saudi Arabia’s oil industry. brent is now at levels not seen since May 2019.

The strike on the Aramco facilities — including one of the world’s biggest oil ports — by Yemen’s Huthi rebels Sunday followed the bombing of the country’s capital Sanaa by a Saudi-led military coalition.

The rising hostilities underscore a dangerous intensification of Yemen’s conflict between the coalition-backed Yemeni government and the Iran-backed Huthis, despite a renewed US push to end the war in the crude-rich region.

“So far, there have been no reports of significant damage or oil supply chain disruptions, but this is an evolving story that will keep oil traders on their toes,” said Axi’s Stephen Innes.

Key figures around 0230 GMT

Tokyo – Nikkei 225: UP 0.2 percent at 28,926.03 (break)

Hong Kong – Hang Seng: DOWN 0.3 percent at 29,021.38

Shanghai – Composite: UP 0.3 percent at 3,512.76

Brent North Sea crude: UP 2.6 percent at $71.17 per barrel

West Texas Intermediate: UP 2.6 percent at $67.79 per barrel

Euro/dollar: DOWN at $1.1900 from $1.1919 at 2145 GMT

Pound/dollar: DOWN at $1.3819 from $1.3841

Euro/pound: UP at 86.13 pence from 86.08 pence

Dollar/yen: UP at 108.49 yen from 108.36 yen

New York – Dow: UP 1.9 percent at 31,496.30 (close)

London – FTSE 100: DOWN 0.3 percent at 6,630.52 (close)

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