Asian markets rose Monday, with the rally spurred on by strong US jobs data which boosted prospects for the world’s top economy and gave the under-fire dollar much needed support.
Regional equities started the week where the Dow left off Friday after the rosy employment figures had sent the US blue-chip index to an eighth straight record finish.
Healthy gains in Tokyo were reinforced by the yen easing against the greenback and following positive earnings results Friday, while Hong Kong and Sydney were also higher. Shanghai was broadly flat as traders awaited trade data later in the week.
The Labor Department reported Friday the US economy added more than 200,000 net new positions for the second straight month — well above forecasts — with the unemployment rate falling back to a 16-year low.
Analysts said the robust job creation figures coupled with rising wages could spur the Federal Reserve to raise the cost of borrowing a third time this year to keep a tight rein on inflation.
“The combination of stronger jobs and wages growth, a fall in the unemployment rate, and an increase in the participation rate all scream a strong labor market,” said Greg McKenna, chief market strategist AxiTrader.
“That, in turn, reinforces the Fed’s path back toward policy normalization and suggests the tapering of the balance sheet will begin soon and more rate hikes are coming.”
– Greenback recovers from lows –
The prospect of higher rates also helped lift the greenback off a 15-month low, with the US currency recovering Friday against the yen and the euro, and holding the bulk of the gains in forex trade Monday.
Ongoing political turmoil in Washington has cast doubt on President Donald Trump’s ability to push through an agenda aimed at boosting growth and dented the dollar against its major peers.
The outlook for the dollar is still uncertain, market watchers warned.
“Given typical August liquidity conditions, we could be in for a bumpy week as the market irons out if we’re in a short term USD correction or a trend reversal,” said Stephen Innes, who heads Asia-Pacific trade at forex firm OANDA.
In commodities trading, crude received a lift from renewed faith in the strength of the US economy.
“The optimism flowed into commodity markets, with copper, iron and crude oil all adding to recent rises,” said Michael McCarthy, chief market strategist at CMC Markets.
Investors’ nerves were also calmed by a more united stance from Washington and Beijing over North Korea, with the two world powers piling pressure on the hermit state Sunday to abandon its nuclear missile program after the UN Security Council approved tough sanctions that could cost Pyongyang $1 billion a year.
North Korea has alarmed the international community with the pace and progress of its missile development program, and in July leader Kim Jong-Un conducted two tests of an ICBM — the first time his country had demonstrated such capability.
— Bloomberg News contributed to this report —
– Key figures around 0230 GMT –
Tokyo – Nikkei 225: UP 0.6 percent at 20,078.12 (break)
Hong Kong – Hang Seng: UP 0.4 percent at 27,685.09
Shanghai – Composite: UP less than 0.1 percent at 3,263.54
Euro/dollar: UP at $1.1797 from $1.1770
Pound/dollar: UP at $1.3053 from $1.3041
Dollar/yen: UP at 110.69 yen from 110.68 yen
Oil – West Texas Intermediate: DOWN 4 cents at $49.54 per barrel
Oil – Brent North Sea: DOWN 3 cents at $52.39
New York – Dow: UP 0.3 percent at 22,092.81 (close)
London – FTSE 100: UP 0.5 percent at 7,511.71 points (close)