By DAYO ADESULU with Agency Reports
Markets React to Strong US Jobs Data
Asian and European markets tumbled on Monday after a stronger-than-expected US jobs report dashed hopes for more interest rate cuts by the Federal Reserve. The report showed that the US economy created 256,000 jobs in December, far surpassing expectations of 150,000-160,000 and marking an increase from November’s revised 212,000.
This robust data, combined with a surge in the US services sector, highlighted the resilience of the economy, diminishing the likelihood of the Fed cutting rates further. The central bank had already trimmed rates three times in 2024, but with inflation still above its 2% target, the Fed signaled only two rate cuts for 2025, a sharp reduction from earlier forecasts.
Economic Outlook for 2025
Bank of America economists, including Aditya Bhave, stated that the Fed’s rate-cutting cycle is likely over, given the economy’s strength and persistent inflation risks. Economic activity remains robust, and inflation risks are skewed to the upside, especially with President-elect Donald Trump’s plans to implement tax cuts, deregulation, and immigration reductions, which could fuel price increases.
Global Market Sell-off
In response to these developments, Asian markets in Sydney, Singapore, Seoul, Mumbai, Taipei, Manila, Bangkok, and Jakarta all faced significant losses. Tokyo was closed for a holiday, but Hong Kong and Shanghai also experienced declines, though Shanghai pared some losses after better-than-expected export and import data from China.
Currency Market and Oil Surge
The British pound dropped to levels not seen since late 2023 amid waning hopes for US rate cuts and concerns about the UK economy. Similarly, the euro remained weak, struggling to hold above its lowest point since November 2022.
Oil prices surged, with both West Texas Intermediate (WTI) and Brent North Sea Crude rising more than 1%. The rally was driven by new sanctions on Russia’s energy sector, targeting major companies like Gazprom Neft. Despite speculation that the US could impose fresh sanctions on Iran, analysts warned that OPEC+ could compensate for any loss in supply, potentially preventing a significant spike in oil prices.
Key Points from the Markets:
- Hong Kong’s Hang Seng Index: Down 1% at 18,874.14
- Shanghai Composite: Down 0.3% at 3,160.76
- London FTSE 100: Down 0.3% at 8,224.50
- Euro to Dollar: Down at $1.0216
- Pound to Dollar: Down at $1.2140
- Crude Oil: WTI up 1.5% at $77.75/barrel; Brent up 1.4% at $80.86/barrel
US Market Reaction
On Wall Street, all three main indices finished the session down by more than 1%, continuing the negative momentum seen since the start of the year.
Looking Ahead
While markets brace for US Federal Reserve policy and ongoing geopolitical risks, analysts remain watchful of supply-side issues such as potential reductions in Russian output, OPEC+ production cuts, and any further escalation of the Middle East crisis.
