By DAYO ADESULU with Agency Reports
Asian and European markets slumped on Monday after a stronger-than-expected US jobs report dashed hopes for additional interest rate cuts, while oil prices continued their rally amid fresh sanctions on Russia’s energy sector.
US Jobs Report Impact
US economic data released Friday revealed that 256,000 jobs were created in December, significantly surpassing November’s revised 212,000 and far outpacing forecasts of 150,000-160,000. This robust job growth, combined with other positive economic signals such as a pickup in the US services sector and record-high job openings, led investors to recalibrate their expectations for future Federal Reserve actions.
The Federal Reserve’s hawkish stance on inflation and its signal of only two interest rate cuts in 2025, down from four previously expected, added to market uncertainty. Bank of America economists indicated that, given the resilience in the labor market and inflation concerns, the Fed’s cycle of rate cuts is likely over. This news undermined hopes of further easing, especially as inflation remains above the Fed’s 2% target.
Market Reactions
Following the US jobs report, global equity markets tumbled:
- Markets in Sydney, Singapore, Seoul, Mumbai, Taipei, Manila, Bangkok, and Jakarta all fell, with Hong Kong and Shanghai also experiencing losses but trimming them as data showed China’s exports and imports exceeded expectations in December.
- European markets followed suit, with London, Paris, and Frankfurt all opening lower.
The pound weakened to lows not seen since late 2023, while the euro struggled at its lowest level since November 2022, driven by fading expectations for US rate cuts and concerns over the UK economy.
Rising Oil Prices
Oil prices extended their rally after the United States and Britain announced new sanctions targeting Russia’s energy sector, including oil giant Gazprom Neft. West Texas Intermediate (WTI) and Brent crude both rose by over 1%.
Despite speculation about potential US sanctions on Iran, analysts, such as Stephen Innes at SPI Asset Management, noted that OPEC+ could offset any reduction in Iranian oil supply, with the group holding back around 5.8 million barrels a day of production. However, significant risks to oil prices remain, including a Middle East crisis, reduced Russian exports, or an unexpected OPEC+ decision to cut production further.
Key Market Data
- Hong Kong (Hang Seng Index): Down 1.0% at 18,874.14
- Shanghai (Composite): Down 0.3% at 3,160.76
- London (FTSE 100): Down 0.3% at 8,224.50
- New York (Dow): Down 1.6% at 41,938.45
- Euro/dollar: Down to $1.0216 from $1.0244
- Pound/dollar: Down to $1.2140 from $1.2210
- Dollar/yen: Down to 157.39 yen from 157.74 yen
- Oil (WTI): Up 1.5% at $77.75 per barrel
- Oil (Brent): Up 1.4% at $80.86 per barrel
Looking Ahead
With uncertainty around interest rates and inflation continuing to affect markets, investors are closely watching upcoming economic reports and geopolitical developments, particularly in the Middle East and Russia. The dynamics between US Federal Reserve policies, oil supply, and global trade will likely continue to influence market sentiment in the coming weeks.
