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Asian Session Makes Gains on Monday as Focus Draws Away from USA
By Isaac Ndegwa
The Asian session on Monday saw shares rally with optimism drifting back to the Asian economies as the US jobs report meant less optimism in the economy. There is a slight dip in optimism as investors are expected to relax their expectations on the Federal Reserve’s moves to hike interest rates, with earlier expectations suggesting the rates would rise as early as September. The MSCI index for Asia-Pacific shares outside Japan show a daily climb of 1.5% by the time the Asian markets were closing. Historically, the good mood in Asia usually spreads over to the European markets and that is also likely today because Europe also encountered a slight boost as the US jobs report was released.The unemployment reports from the USA were however not weak enough for people to say that the Fed has reason to shelve the rate hikes. It only dampened the moods because there had been earlier reports that the Fed may hike rates twice in the space of months. It was still strong enough to make the undecided quarters of the FOMC agree to hike rates but not within a month as the majority had been suggesting. This still leaves a strong case to remain hawkish on the Federal Reserve rate hikes after the Jackson Hole gathering, with the Fed bosses also hinting about a vote to decide when exactly would be right to hike the rates.
Japan’s Nikkei trended higher, gaining 0.7%. The 0.7% jump means Monday was its highest close since May 31s. The index however drifted lower towards the session close as trading became choppy, mostly owing to the monthly dollar shuffles where demands for settling interbank transactions usually skew the actual response of the dollar to other news reports released in the interim. The dollar also slipped further as the BoJ Governor Kuroda gave clear hints that the BoJ has considerations to begin easing Japan’s monetary policy further.
The dollar also fell by half a percent to trade at 103.44 to the Yen by the time the Asian session was ending. The dollar therefore wiped out some of the gains that had been made towards the close of the previous week, where it touched highs of 104.32.
The policy makers in the USA generally think that the economy is almost at full strength. That partly implies that there is nothing wrong with having a slightly weaker than expected performance of the job market as long as it still functions above the required threshold. Nonfarm payrolls rose by 151,000 versus an expected 180,000. The US economy still appears formidable enough to hike the rates and the only card being played is the timing card.
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By Isaac Ndegwa
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