Asian stock markets rose on Monday after a weaker-than-expected US jobs report eased concerns that the Federal Reserve would start tapering its stimulus measures soon. Investors also welcomed fresh support from China’s regulators for the property sector, which has been under pressure from a debt crisis.
US Jobs Report Signals Cooling Economy
On Friday, the US Labor Department reported that employers added 187,000 jobs in August, below the consensus forecast of 235,000. The job growth marked an increase from July’s revised gain of 157,000, but still pointed to moderating hiring compared with earlier this year. From June through August, the economy added 449,000 jobs, the lowest three-month total in three years.
The report also showed the unemployment rate rose to 3.8% from 3.5%. That’s the highest level since February 2022, though still low by historical standards. The labor force participation rate, which measures the share of working-age people who are employed or looking for work, remained unchanged at 61.7%.
The disappointing jobs data suggested that the US economy was losing momentum amid the resurgence of COVID-19 cases driven by the Delta variant. It also reduced the likelihood that the Fed would announce a plan to scale back its $120 billion monthly bond purchases at its next policy meeting in September.
The bond-buying program, which began in March 2020, has helped lower borrowing costs and support economic recovery from the pandemic. However, it has also fueled inflationary pressures and asset bubbles, prompting some Fed officials to call for an earlier tapering.
“It appears that global markets are primed to be smitten with the idea of a ‘Nirvana’ Fed tightening outcome, entailing the ‘immaculate dis-inflation’ that does not cause employment pain,” Tan Boon Heng of Mizuho Bank said in a commentary.
Asian Shares Surge on Stimulus Hopes
The prospect of a prolonged stimulus from the Fed boosted investor sentiment in Asia, where many countries are still struggling with COVID-19 outbreaks and lockdowns. The MSCI Asia Pacific Index, which tracks shares in 11 markets across the region, rose 1.4% on Monday, its biggest gain since July 21.
Hong Kong’s Hang Seng index jumped 2.4% to 18,828.91 while the Shanghai Composite index added 1% to 3,166.62. Tokyo’s Nikkei 225 was up 0.6% at 32,899.99. In Seoul, the Kospi edged 0.2% higher, to 2,569.52. Sydney’s S&P/ASX 200 added 0.5% to 7,312.60. Shares also rose in Taiwan and Southeast Asia.
Asian markets also welcomed the news that China’s financial regulators had cut down-payment requirements for first and second-time home buyers and lowered rates on existing mortgages. The move was seen as a sign of support for the property sector, which has been rattled by the debt woes of China Evergrande Group, the country’s largest developer.
Evergrande has been struggling to repay its $300 billion debt pile amid a slump in sales and a regulatory crackdown on leverage in the industry. The company’s shares have plunged more than 80% this year and its bonds have been downgraded to junk status by rating agencies.
The property sector accounts for about a quarter of China’s GDP and is a major source of employment and consumption. A disorderly collapse of Evergrande could have systemic implications for the world’s second-largest economy and global financial markets.
“The easing measures are aimed at stabilizing market expectations and preventing a sharp correction in property prices,” Yeap Jun Rong of IG said in a note.
US Markets Closed for Labor Day
US markets will be closed on Monday for the Labor Day holiday, giving investors a breather after a volatile week. On Friday, the S&P 500 finished 0.2% higher at 4,515.77, notching its seventh straight monthly gain in August. The Dow Jones Industrial Average rose 0.3% to 34,837.71. The Nasdaq composite closed less than 0.1% lower, at 14,031.81, breaking a five-day winning streak.
Investors will be watching for more clues on the Fed’s policy outlook this week, as several Fed officials are scheduled to speak ahead of a blackout period before the September meeting. They will also monitor the latest data on inflation, consumer sentiment and producer prices.