HONG KONG (AFP) - Asian markets struggled on Monday (Aug 8) and the US dollar held big gains as a blockbuster US jobs report on Friday ramped up bets that the Federal Reserve will announce more sharp interest rate hikes as it tries to tame runaway inflation.
While the employment reading - which was more than twice as high as expected - indicated that the world's top economy remained resilient despite rising prices and borrowing costs, it will complicate the central bank's plans to tighten monetary policy.
Traders have hoped that with several indicators pointing to a slowdown, including gross domestic product figures showing a technical recession, policymakers could begin to ease back on their pace of rate hikes.
Now, speculation is growing that the Fed will have to announce a third successive 75- basis point increase next month, particularly as officials have said their decisions will be data-dependent.
"Friday's payrolls report indicates an overheated labour market that continues to tighten further," said SPI Asset Management managing partner Stephen Innes.
"Hence at minimum, the markets expect another 100 basis points of Fed funds rate increases over the next three meetings... with risks skewed towards significant increases."
All eyes are now on the release this week of United States July inflation data, which is expected to show a slight slowdown from June but still at four-decade highs.
"(The) report seems very unlikely to offer 'compelling evidence' of a slowdown needed for the Fed to pull away from its aggressive inflation-fighting mode," Mr Innes added.
The jobs figures left Wall Street's main indexes mixed on Friday, and Asia followed suit on Monday with markets fluctuating in early trade.
However, there was some relief that tensions had calmed since US House Speaker Nancy Pelosi's visit to Taiwan last week sparked a furious reaction from China that saw it conduct days of live-fire military drills around the island.
Hong Kong's Hang Seng was down 0.9 per cent, while Australia's S&P/ASX 200 was flat and South Korea's Kospi index dipped 0.2 per cent.
Singapore's Straits Times Index was down 0.6 per cent at 11.06am local time.
Japan's Nikkei index edged up 0.2 per cent and Shanghai's Composite Index inched up 0.1 per cent, with better-than-expected Chinese trade data offset by fresh worries about Covid-19 lockdowns in the country that threaten the economic recovery.
The prospect of higher interest rates sent the dollar surging, and it held on to those gains in Asia.
Bets on a recession across leading economies continued to weigh on oil prices as investors worry about the impact on demand - figures last week indicated that Americans were driving less now than in summer 2020 at the height of the pandemic.
A rise in US stockpiles was partly responsible for a 10 per cent drop in the commodity last week, pushing West Texas Intermediate crude below US$90 for the first time since February.
Both main contracts have lost all the gains seen in the wake of Russian President Vladimir Putin's invasion of Ukraine, which led the US and Europe to ban imports of Russian crude, hammering already thin supplies.
