Marketmind: Jobs Growth, Fed Indigestion

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A look at the day ahead in European and global markets from Anshuman Daga

There’s no stopping the Federal Reserve.

While U.S. employers hired slightly more workers last month than markets expected, the red-hot labour market means the Fed’s aggressive monetary policy is here to stay.

New York Fed President John Williams reiterated on Friday that more rate increases are needed to bring down inflation.

Futures pricing now indicates a nearly 90% chance of a 75 basis point rate hike next month and more than 150 bps of tightening by May.

Worries about higher borrowing costs pushed down Asian stocks on Monday, following Friday’s selloff on Wall Street.

Activity remains thin, even with China reopening after a week’s break, due to holidays in Japan, South Korea and Taiwan. [MKTS/GLOB]

Asian tech shares saw sharp falls along with chipmakers, following the latest U.S. crackdown on China’s chipmaking industry to slow Beijing’s technological and military advances.

Analysts are clearly focused on how the Fed can slow a resilient jobs market.

“What else can the Fed do to slow down demand and bring inflation closer to target; how does it reduce job creation?” Rick Rieder, head of BlackRock’s global allocation investment team, asked in a note.

“One wonders at this point whether the Fed, or government legislation, toward banning resume software may be the only way to slow recruits from reaching out to potential employers!”

The jobs data marked the series’ fifth straight above-expectations print and its 10th upside surprise in the last 12 months.

This week will be dominated by the International Monetary Fund and World Bank’s annual meeting where the who’s who of finance and central banking descend on Washington.

While U.S. inflation numbers, retail sales data, consumer sentiment gauges and minutes from the Fed’s latest meeting are also due this week.

Graphics: Nonfarm payrolls (https://graphics.reuters.com/USA-STOCKS/zjvqkxdkkvx/nfpr.png)

Key developments that could influence markets on Monday:

Economic data- Sweden house prices, Norway and Denmark consumer prices

LONDON – Speech by Fergal Shortall, Director for Monetary Analysis, MPC of the Bank of England – 0815 GMT

FRANKFURT – Opening remarks by ECB chief economist Philip Lane at the ECB Conference on Monetary Policy – 1300 GMT

CHICAGO, Illinois – Federal Reserve Bank of Chicago President Charles Evans speaks on current economic conditions and monetary policy – 1300 GMT

(Reporting by Anshuman Daga; Editing by Sam Holmes)

Copyright 2022 Thomson Reuters.

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