Dollar Up, Asian Markets Down as Inflation Data and Earnings Season Loom

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Asian stocks declined on Monday as the dollar held near a 14-month high, following a robust U.S. payrolls report that led to rising bond yields and tested elevated stock valuations as the earnings season began.

The impact of the jobs report on expectations for U.S. rate cuts heightened the importance of Wednesday's consumer price data, where any core inflation rise above the forecasted 0.2% could end any hope of rate cuts.

Adding to the concerns, oil prices surged to four-month highs due to a slowdown in Russian crude exports amid heightened U.S. sanctions. 

Markets have already reduced their expectations for Federal Reserve rate cuts, with projections now at just 27 basis points for 2025, and the terminal rate now seen at 4.0% compared to the 3.0% many expected at the start of 2024.

“Given such strong data, we now expect the Fed to cut rates only once this year, by 25bp in June,” said Barclays’ Christian Keller, citing expectations for economic slowdown and declining inflation in the first half of the year, before tariffs push inflation higher in the second half.

With several Fed officials set to speak this week, including New York Federal Reserve President John Williams on Wednesday, the hawkish stance on rates lifted 10-year Treasury yields to 4.79%, their highest in 14 months.

This increased yield pressure on equities and raised borrowing costs for businesses and consumers.

The strong dollar, boosted by higher Treasury yields, saw the euro hit a two-year low at $1.0240, marking its eighth consecutive week of decline. The dollar was steady against the yen at 157.84, though below a six-month peak, amid speculation the Bank of Japan may raise its inflation forecast.

Sterling remained near 14-month lows at $1.2202, as concerns over a potential increase in borrowing to fund UK government spending weighed on sentiment.

Gold held steady at $2,688 an ounce, showing resilience against the stronger dollar and rising yields.

Oil prices rose as supply concerns intensified, with Russian seaborne exports falling to their lowest levels since August 2023, even before the latest U.S. sanctions. Brent crude increased by $1.43 to $81.19 a barrel, while U.S. crude gained $1.50 to $78.07.

 

 

 

Paraphrasing text from "Reuters" all rights reserved by the original author.