(Refiles to fix payrolls report story link in paragraph 1)
By Wayne Cole
SYDNEY (Reuters) -Asian shares slipped on Monday while the dollar held near 14-month peaks after an unambiguously strong payrolls report shoved up bond yields and tested lofty equity valuations just as the earnings season gets under way.
The impact of the jobs report on U.S. rate cut prospects also raised the stakes for consumer price figures on Wednesday where any rise in the core greater than the forecast 0.2% would threaten to close the door on easing altogether.
Not helping, was a spike in oil prices to four-month highs amid signs of weaker crude shipments from Russia as Washington stepped up sanctions on the country.
Markets have already scaled back expectations for Federal Reserve rate cuts to just 27 basis points for all of 2025, with the terminal level now seen around 4.0% compared to the 3.0% many had hoped for this time last year.
“Given such strong data, we now expect the Fed to cut rates only once this year, by 25bp in June,” said Christian Keller, head of economic research at Barclays (LON:BARC).
“We still expect the FOMC to proceed with a cut in June, as we expect the economy to slow in coming quarters and inflation to continue to decline in H1, before tariffs lead to some firming in inflation in H2.”
At least five Fed officials are on the docket to speak this week and offer their reaction to the jobs surprise, with the influential Federal Reserve Bank of New York President John Williams appearing on Wednesday.
The hawkish turn on rates lifted yields on 10-year Treasuries to 14-month peaks of 4.79%, and they were last trading at 4.764% in Asia.
Higher yields on risk free bonds raise the discounting bar for corporate earnings and make debt relatively more attractive compared to equities, cash, property and commodities.
They also raise borrowing costs for businesses and consumers, and that is before President-elect Donald Trump’s proposed tariffs inflate import prices.
This could test the optimism around corporate earnings as the season kicks off with the major banks on Wednesday, including Citigroup (NYSE:C), Goldman Sachs and JPMorgan.
BEARS EYE STERLING
A holiday in Japan made for thin early trading on Monday and MSCI’s broadest index of Asia-Pacific shares outside Japan edged down 0.4%.
While the Nikkei was shut, futures traded down at 38,770 compared to a cash close of 39,190.
South Korean stocks eased 0.2%, with the political situation still in flux as a Constitutional Court hearing begin on Tuesday to decide if impeached president, Yoon Suk Yeol, will be removed from office or reinstated.
Over in China, trade figures for December are due later Monday followed by data on gross domestic product, retail sales and industrial output on Friday.
S&P 500 futures and Nasdaq futures were both off 0.1%, following Friday’s pullback.
The inexorable rise in Treasury yields has boosted the dollar across the board and seen the euro fall for eight weeks straight to huddle at $1.0240, just above its lowest since November 2022. [USD/]
The dollar was steady at 157.84 yen, though off a six-month top of 158.88 amid reports the Bank of Japan might revise up its inflation forecasts this month as a prelude to hiking rates again.
Sterling was pinned near 14-month lows at $1.2202, with sentiment soured by a recent rout in the gilt market on concerns the Labour government would have to borrow more to fund spending pledges. [GBP/]
British finance minister Rachel Reeves on Saturday vowed she would act to ensure the government’s fiscal rules were met.
Gold prices were holding firm at $2,688 an ounce, having proven surprisingly resilient in the face of a stronger dollar and higher bond yields. [GOL/]
Oil prices continued to climb on supply concerns as Russia’s seaborne exports hit their lowest since August 2023, even before the latest round of U.S. sanctions. [O/R]
Brent jumped $1.43 to $81.19 a barrel, while U.S. crude surged $1.50 to $78.07 per barrel.