HONG KONG – A forecast-busting United States jobs report and the Senate’s approval of President Joe Biden’s huge stimulus package helped push most Asian equities higher today, while Brent crude broke past US$70 (RM286.26) for the first time in almost two years after an attack on energy facilities in Saudi Arabia over 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 last month, reaffirming the view that it is on track for a strong recovery helped by the roll-out of Covid-19 vaccines and easing of lockdowns.
The report comes just ahead of senators passing Biden’s US$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 Federal Reserve seemed to have learnt something from their attempts to reheat the economy after the great financial crisis,” said David Kelly of 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 1% each. Shanghai was also well up after figures over 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 said markets are worried that the Fed is reacting too slowly, with strategist Louis Navellier saying over 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 2% today – having climbed around 4% last 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 yesterday 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 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% at 28,926.03 (break)
Hong Kong – Hang Seng: DOWN 0.3% at 29,021.38
Shanghai – Composite: UP 0.3% at 3,512.76
Brent North Sea crude: UP 2.6% at US$71.17 per barrel
West Texas Intermediate: UP 2.6% at US$67.79 per barrel
Euro/dollar: DOWN at US$1.1900 from US$1.1919 at 2145 GMT
Pound/dollar: DOWN at US$1.3819 from US$1.3841
Euro/pound: UP at 86.13 pence from 86.08 pence
Dollar/yen: UP at ¥108.49 from ¥108.36
New York – Dow: UP 1.9% at 31,496.30 (close)
London – FTSE 100: DOWN 0.3% at 6,630.52 (close). – AFP, March 8, 2021
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