Inflation specter weighed on bonds causing Asian shares to falter


On Monday, the Asian market is in for a bumpy ride as concerns for increasing inflation that affected bonds pulled Wall Street levels from all-time highs and kick started speculation that central banks worldwide might be compelled to tighten monetary policy more.

Nikkei futures NKc1 shed about 1.6 percent on its early trade. While news from the down under, Australia’s main index already dropped 1.4 percent.

E-mini futures for the S&P 500 ESc1 fell 0.5 percent during the early trade, an uncommonly sharp move for Asian hours.

Friday’s U.S. payroll report revealed wages that were growing at their fastest pace in over 8 and a half year spooked investors, the payroll report also fueled inflation expectations.

This year, futures markets responded by pricing in the risk of more than three rate increases from the Fed Reserve.

According to Deutsche Bank macro strategist Alan Ruskin, the data regarding the earnings almost perfectly fit with the narrative of rising wage pressures which are to be dismissed.

He also added that the data will motivate the debate on whether the Federal Reserve is behind the curve. I will increase the chances of the Fed median dots moving up to 4 rate increases for the year 2018.

This movement would affect upcoming markets and commodity currencies negatively. Both New Zealand and the Australian dollars dropped after the job numbers report was issued, along with a collection of Asian currencies.


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