On Monday, Asian shares made slight gains while the US dollar rose after US jobs data suggested a tight labor market, further increasing expectations that the Federal Reserve will raise interest rates at its meeting next month.
The MSCI’s broadest index of Asia-Pacific shares outside Japan rose by 0.12%, and Japan’s Nikkei gained 0.5%. However, China shares slipped, with the blue chip CSI300 Index 0.32% lower, and the Shanghai Composite Index slipped 0.16% amid increasing geopolitical tensions around the Taiwan Strait.
The US Labor Department data on Friday showed that nonfarm payrolls increased by 236,000 jobs last month, just shy of the 239,000 expected by economists in a Reuters poll. The data also indicated that annual wage gains slowed but remained too high to be consistent with the Federal Reserve’s 2% inflation target.
The labor market is still too tight for the Fed to lower inflation to its 2% target without further interest rate hikes. According to CME FedWatch tool, markets are now pricing in a 66% chance of the Fed raising interest rates by 25 basis points in its May 2-3 meeting.
The inflation report due on Wednesday and minutes of the central bank’s last meeting in March are also scheduled to be released on Wednesday, which will shape the path the Fed will take in its battle against prices.
In the currency market, the US dollar index, which measures the US currency against six major peers, rose 0.225% to 102.25, lifting away from the two-month low of 101.40 the index touched last week.