Asian markets fluctuate after healthy start to the new year

Asian investors struggled Friday to maintain the week’s positive momentum as they eyed sharp losses on Wall Street that came after forecast-beating jobs data suggested the Federal Reserve will have to keep lifting interest rates.

Regional markets have enjoyed a strong start to the year, largely thanks to optimism over China’s reopening and signs it is toning down its tough talk on a number of issues domestically and geopolitically.

But long-running fears that central bank policy tightening would cause a recession were brought back into play by figures showing more jobs than expected were created in the US private sector last month.

The reading from payroll firm ADP indicated the labour market remained tight — putting upward pressure on wages — meaning the Federal Reserve still had much work to do in its battle against decades-high inflation.

Several top Fed officials also lined up Thursday to warn the bank will likely have to keep lifting borrowing costs this year, with some suggesting they could go as high as 5.4 percent.

Minutes from the December meeting reinforced bets on further tightening.

Thursday’s data make the release of a key non-farm payrolls report later in the day much more important.

“What the Fed really wants to see is some slack build up in the labour markets, in hopes it can do this gently without creating much of a downturn,” former Indian central bank boss Raghuram Rajan told Bloomberg Television.

“But it may well be that by the time it seems that it will have raised rates enough, that the momentum takes us down to a mild recession at the very least.”

SPI Asset Management’s Stephen Innes added: “Although ADP has not been the sharpest predictor for NFP, any incremental evidence that the labour market remains hot supports the Fed’s hawkish impulse.”

Asian markets were mixed after all three main indexes on Wall Street fell more than one percent.

Hong Kong dipped after three days of gains that saw it add more than six percent, while Singapore, Mumbai, Wellington and Manila were also in the red. Shanghai edged up, with help from reports saying China was considering relaxing strict rules on borrowing for property developers.

Tokyo, Sydney, Seoul, Taipei, Bangkok and Jakarta also rose.