Asia markets rise on resilient US jobs report, Fed faces tough decision on interest rates

Shares in Asia mostly rose on Monday following the release of a report on Friday showing resilience in the US job market. Benchmark indexes rose in Tokyo and Seoul, but fell in Shanghai. Markets in Hong Kong and Sydney were closed for Good Friday holidays. US futures were mixed, while oil prices declined.

According to Friday’s highly anticipated report on US employment, hiring slowed more than expected last month, with employers adding 236,000 jobs, compared with February’s 326,000, slightly below economists’ expectations. Wages, however, grew 0.3% from February, matching expectations. Wage gains slowed year over year to 4.2% from 4.6%.

In Asia, central banks are struggling to balance curbing inflation with avoiding putting economies into recession. The Federal Reserve is facing a tough decision over whether to raise interest rates to drive down inflation that remains high or to hold off given signs of a slowing economy.

In Tokyo, the Nikkei 225 index added 0.4% to 27,629.25. In Seoul, the Kospi surged 0.9% to 2,512.28. However, the Shanghai Composite index gave up early gains, losing 0.2% to 3,322.58. Shares rose in Taiwan but fell in Southeast Asia.

“I suspect we are entering the peak uncertainty phase around the Fed’s next move as investors debate if credit tightening from financial stress will be enough to warrant cuts or if we are heading for more hikes,” said Stephen Innes of SPI Asset Management in a commentary.

The US stock market was closed on Friday for Good Friday, as were many markets across Europe. This left the US bond market as one of the few open to react to the latest jobs update. The immediate reaction from the bond market seemed to lean toward another hike, with yields rising for Treasuries, as did bets for the Fed to raise rates by another quarter of a percentage point in May at its next meeting.

A cooler job market is precisely what the Fed is trying to achieve. Raising rates is one of the Fed’s most effective ways to undercut inflation, but it’s a notoriously blunt tool that works only by slowing the entire economy, which raises the risk of a recession and hurts prices for stocks, bonds, and other investments.

More data is coming this week, with the latest monthly update on consumer prices to be released on Wednesday. Economists expect it to show inflation slowing but still well above the Fed’s target. Many economists see a recession later this year as likely, but some say there is still a narrow possibility that the Fed could raise rates just enough to get inflation fully under control without causing a severe recession.

US benchmark crude lost 3 cents to $80.67 per barrel in electronic trading on the New York Mercantile Exchange, while Brent crude, the international standard, lost 9 cents to $85.03 per barrel. The dollar rose to 132.69 Japanese yen from 132.16 yen, while the euro slipped to $1.0892 from $1.0902.