ISLAMABAD: Shares in Asia’s stock markets recovered on Monday, helped by a robust US jobs report that strengthened expectations for global economic growth.
However, investors elsewhere appeared cautious as rising oil prices revived concerns over inflation and interest rates.
MSCI’s broadest index of Asia-Pacific shares outside Japan rose 0.9 per cent, with Japan’s Nikkei gaining around 2 per cent and South Korea’s Kospi climbing more than 3 per cent. Chinese blue-chip shares also edged higher.
The stocks registered gains after US employment data showed stronger-than-expected job growth in August, supporting the view that the world’s largest economy remains resilient.
The data, however, also reduced expectations of an imminent easing in monetary policy and increased the possibility of a Federal Reserve rate hike.
Oil prices moved higher after renewed US-Iran military tensions in the Gulf raised fresh concerns about disruptions to energy supplies.
Brent crude rose 0.2 per cent to $96.45 a barrel after gaining almost 10 per cent last week, while US West Texas Intermediate crude rose 0.4 per cent to $91.85.
Iran said it would announce a restricted zone outside the Strait of Hormuz after US forces struck three Iranian tankers. Reciprocally, Iran’s Islamic Revolutionary Guard Corps launched ballistic missiles at two US Navy ships.
The developments have heightened concerns over the security of one of the world’s most important oil shipping routes.
The rise in energy prices presents a fresh challenge for central banks because sustained higher oil costs can feed into consumer inflation and weaken economic growth.
The inflationary pressure is particularly significant ahead of the release of US consumer price data on Friday.
Asian traders watch Fed policy
Markets are now closely watching the Federal Reserve’s policy outlook.
Strong employment data has increased expectations of tighter monetary policy, even as equity markets in Asia continued to benefit from optimism over economic growth and technology stocks.
READ ALSO: Asian Stocks Tumble As US-Iran Fighting Lifts Oil
European markets face a similar dilemma. The European Central Bank is widely expected to raise its policy rate to 2.75 per cent this week. Investors are also assessing whether persistent energy inflation could require further increases later in the year.
The contrasting market signals — stronger Asian equities and rising oil prices — highlight the uncertainty facing investors.
Robust economic activity is supporting risk appetite, but the renewed energy shock could keep inflation elevated, push borrowing costs higher and eventually weigh on global growth.
The US markets were closed on Monday for the Labour Day holiday, leaving investors focused on Asian and European trading, oil prices and the upcoming US inflation report for clues about the next direction of global markets.
