Stock markets take knock

– Stock markets retreated yesterday, extending a weak start to the year, after a forecast-busting US jobs report further dampened hopes of an early cut to interest rates in the world’s biggest economy.

US and European oil futures slid nearly 3% after Saudi Arabia cut the price of its crude, analysts said, weighing also on shares of energy majors.

The keenly awaited nonfarm payrolls data on Friday showed the US economy remained resilient despite interest rates sitting at a two-decade high and inflation still well above the Federal Reserve’s target.

However, the figures dealt another blow to expectations the central bank would start to cut borrowing costs in the next few months.

“Friday’s US jobs report brought fresh concerns over the likeliness of the Fed to cut rates in March as markets have been widely anticipating, with a hot payrolls figure coming alongside a higher wage growth reading,” said Joshua Mahony, chief market analyst at Scope Markets.

Attention now turns to the release this week of US consumer price figures.

Equities ended 2023 with a surge as traders bet on a string of rate reductions this year due to falling inflation and softening of the labour market.

But the release of minutes last week from the Fed’s December meeting showed decision-makers were happy to keep rates elevated for some time to ensure prices are under control.

Policymakers have signalled 75 basis points of cuts this year, but markets have priced in 150 points.

“The first week of 2024 brought contradictory data signals,” Barclays economists said. “Solid US jobs growth, cautious Fed minutes and a still robust US economy raise doubts about markets’ aggressive Fed rate-cut expectations.”

Wall Street ended slightly higher on Friday, but the positive finish did not cross over to yesterday’s trading.

A sell-off in tech giants hammered Hong Kong and Shanghai was also deep in retreat. Tokyo was closed for a holiday. London and Paris fell, while Frankfurt edged higher, nearing the half-way stage in European deals.

In US pre-market trading, shares in Boeing slumped more than 8% after a mid-air emergency. –