Asia: Markets mostly up but Fed taper talk, Delta temper gains

[SHANGHAI] Most Asian markets rose on Monday but investors remained cautious after a forecast-beating US jobs report reinforced optimism about the economic recovery but fanned speculation the Federal Reserve could begin tapering monetary policy this year.

Spiking infections around the world from the Delta Covid variant are also jangling nerves and hammering oil prices as governments reassess their growth outlooks with some - including China - forced to reimpose lockdowns and other containment measures.

Data last Friday showed the world's biggest economy created 943,000 new jobs in July, while the June reading was also revised higher to more than 900,000. The news provided some much-needed reassurance that the rebound was still on track despite Delta's spread.

However, it also renewed concerns that in a bid to prevent overheating, the Fed will start to wind down the ultra-loose policies - including record-low interest rates and a vast bond-buying scheme - that have been integral to an equity market rally since April last year.

The bank has continuously stressed that it will maintain its accommodative stance for as long as the economy needs to recover, but with inflation at multi-year highs and jobs returning, it is coming under increasing pressure to act.

"You have these concerns that if the economy is growing very, very strongly then that might bring forward the tightening or the tapering by the Fed," Shane Oliver, at AMP Capital, told Bloomberg Television.

"There is a good chance they might announce that tapering in September and it would start later this year."

National Australia Bank's Rodrigo Catril added: "Overall, there is not a lot of disagreement on a taper announcement coming sometime between September-December followed by actual tapering sometime between November and January."

Still, US investors were broadly upbeat, with the Dow and S&P 500 ending at all-time highs, though the Nasdaq slipped with tech firms more sensitive to higher rates.

And Asian investors mostly took up the baton, though early rallies fizzled.

Hong Kong, Shanghai, Manila, Mumbai, Kuala Lumpur and Bangkok rose but Seoul, Wellington, Taipei and Jakarta slipped while Sydney was flat. Tokyo and Singapore were closed for holidays.

London dipped at the open, while Paris and Frankfurt edged higher.

The prospect of higher rates down the line was also weighing on gold, which fell more than one percent as investors were attracted by the possibility of better returns elsewhere. The yellow metal sank around 2.8 per cent on Friday after the jobs data.

There was little major reaction to data showing growth in Chinese exports slowed last month, while inflation came in slightly above expectations.

However, oil prices extended Friday's losses as the fast spread of Delta raises concerns about the outlook for demand, particularly in China.

Investors are also keeping tabs on developments in Washington, where lawmakers are close to a vote on President Joe Biden's US$1.2 trillion infrastructure bill, which will provide another massive shot in the arm for the economy.

Bitcoin was hovering around US$44,000 after surging more than 20 per cent to more than US$45,000 between Friday and Sunday. Analysts said cryptocurrencies were enjoying a recovery after weeks of being buffeted by Chinese moves to crack down on the sector.

AFP