BEIJING: Asian stock markets fell Monday after strong U.S. jobs data increased chances that the Federal Reserve will raise interest rates sooner.
The Shanghai Composite Index lost 1.1 percent to 3,206.31 and Tokyo’s Nikkei 225 shed 0.7 percent to 18,828.94. Hong Kong’s Hang Seng lost 0.7 percent to 24,000.70 and Seoul’s Kospi declined 0.5 percent to 2,002.00. Sydney, Singapore, New Zealand and Taiwan also fell. On Friday, the prospect of higher interest rates sent U.S. stocks tumbling.
Strong U.S. employment growth in February was good news for workers but alarmed investors who worried a rate hike, previously not expected until as late as October, might happen as early as June. The Fed has held interest rates close to zero for more than six years to stimulate growth following the 2008 global crisis. But Friday’s announcement that employers added 295,000 jobs last month, which was far above expectations of about 235,000, fueled expectations unemployment would fall further and inflation might pick up. That could prompt the Fed to try to tame price pressures by raising rates, which would slow economic growth.
“The market has been positioning itself for a (U.S. interest rate) rise in October. Friday’s data suggest June or July is a real possibility,” IG market strategist Evan Lucas said in a report. “The reaction from the U.S. market on Friday shows no one is really positioned for moves in the Fed funds rate. The rush for the exit will be rapid when it does shift.”