Asian markets experienced a sharp decline on Friday, driven by a robust US jobs report that dashed expectations for further interest rate cuts. Oil prices also surged, extending recent gains triggered by sanctions on Russia's energy sector. The equity sell-off mirrored losses on Wall Street, where all three major indexes closed over one percent lower.
Asian markets plunged on Friday following a robust US jobs report that dampened expectations for further interest rate cuts, while oil prices continued their upward trajectory fueled by fresh sanctions on Russia's energy sector . The equity sell-off mirrored significant losses on Wall Street, where all three major indexes closed over one percent lower as the new trading year faltered.
The eagerly anticipated jobs data released on Friday revealed that the US economy added 256,000 jobs in December, exceeding November's revised figure of 212,000 and surpassing forecasts of 150,000-160,000. This positive employment data followed reports indicating an uptick in the crucial US services sector during December, with price components surging to their highest level since January 2024, and job openings reaching a six-month high in November. Hopes that the Federal Reserve would continue its rate-cutting cycle through 2025, having implemented three reductions last year, were dashed in December when the central bank indicated only two reductions over the next 12 months, down from the previously anticipated four. This hawkish shift came as inflation remained stubbornly above the Fed's two percent target, alongside concerns that President-elect Donald Trump's plans to slash taxes, regulations, and immigration could rekindle price pressures. 'Given a resilient labour market, we now think the Fed cutting cycle is over,' stated Bank of America's Aditya Bhave and other economists. 'Inflation is stuck above target: in the December (summary of economic projections), the Fed not only marked up its base case for 2025 significantly, but also indicated that inflation risks were skewed to the upside. Economic activity is robust.' Asian equities declined across the board, with Hong Kong, Taipei, and Manila experiencing losses of over one percent each, while Shanghai, Sydney, Singapore, Seoul, and Jakarta also witnessed significant drops. Tokyo remained closed for a holiday. Oil prices surged, adding to the market unease, with both benchmark contracts climbing approximately two percent, extending Friday's gains of over three percent, following the United States and Britain's announcement of new sanctions against Russia's energy sector, including the oil giant Gazprom Neft. However, analysts anticipate that prices may not escalate dramatically, even amidst speculation that Trump will impose additional sanctions on Iran. 'A significant and perhaps underpriced risk to crude oil prices is the potential for supply to outstrip demand, especially given OPEC+'s intention to reintroduce barrels to the market,' commented Stephen Innes at SPI Asset Management. 'Even if US sanctions curtail Iranian oil production by 1.5 million barrels a day — a scenario similar to that during Trump's previous presidency — this amount could easily be compensated by OPEC+, which is currently holding back 5.8 million barrels a day, or 5.3 percent of the total global production capacity.' He added, however, that certain factors could propel crude prices skyward, including an escalation of the Middle East crisis, a substantial reduction in Russian output or exports, and a strategic reversal by OPEC+ to slash production
ASIAN MARKETS OIL PRICES US JOBS REPORT FEDERAL RESERVE INTEREST RATES RUSSIA ENERGY SECTOR SANCTIONS
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