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Asian Markets Mixed Ahead of the Fed Report and US Jobs Report

On Tuesday, a currency trader walks past screens displaying the Korea Composite Stock Price Index (KOSPI) at a foreign exchange dealing room in Seoul, South Korea.

Amid worries of a potential global recession, Asian stock markets were mixed on Tuesday ahead of updates on US employment.

Following a year in which major stock markets experienced steep declines, traders are concerned that the Federal Reserve and other central banks, which have raised interest rates frequently to curb inflation, may now be willing to plunge the entire world into a recession.

According to Stephen Innes of SPI Asset Management, inflation may “remain far north of 3% by the end of 2023, simply too high for central bank comfort.”

The Shanghai Composite Index SHCOMP, +0.88%, rose 0.6%, while the Hong Kong Hang Seng HSI, +1.84%, rose 1.3%. For a holiday, Japanese markets were closed.

Seoul’s Kospi 180721, -0.31% fell 0.2% after South Korea’s 2022 exports fell 9.5% year on year, resulting in the country’s largest trade deficit ever.

The S&P/ASX 200 XJO, -1.31% in Sydney, fell 1.3% after Australian house prices fell 1.1% and a manufacturing activity index fell. Singapore stocks STI, -0.17% fell, while Jakarta stocks JAKIDX, +0.55%, rose. Markets in New Zealand were closed for the holiday.

The most closely watched data points this week are the minutes from the Fed’s most recent meeting, which will be released on Thursday. This will provide traders with an update on the Federal Reserve’s thinking on the need for additional rate hikes.

It will be followed on Friday by employment data from the United States.

The Market Forcast

Forecasters anticipate a decrease in monthly job gains in December, which they hope will encourage the Fed to scale back plans for additional rate hikes. However, the Fed has a “clear focus on keeping inflation under control,” which “could still leave pricing data as the key driver of market moves,” according to IG analyst Yeap Jun Rong in a report.

Traders are also anticipating corporate earnings reports in mid-January.

Global central banks are attempting to quell inflation, which has reached multi-decade highs in many countries. Russia’s invasion of Ukraine has exacerbated the situation, disrupting commodity markets and causing oil and wheat prices to skyrocket.

The United States financial markets were closed on Monday for a holiday after Wall Street’s benchmark S& P 500 index SPX, -0.25%, ended 2022 down 19.4%, the most since the 2008 financial crisis. According to S&P Dow Jones Indices, its stock value has dropped by $8.2 trillion.

German and French market benchmarks closed higher on Monday.

Market Insights

The Federal Reserve’s key lending rate is now 4.25% to 4.5%, up from near zero after seven increases last year. The Federal Reserve of the United States anticipates a rate range of 5% to 5.25% by late 2023, with no rate cuts before 2024.

On the New York Mercantile Exchange, benchmark US crude CLG23, 0.50%, fell 20 cents to $80.06 per barrel in electronic trading. On Monday, the contract rose $1.86 to $80.26. Brent crude BRNH23, 0.40%, the international oil trading price, fell 26 cents to $85.65 per barrel in London. It increased by $2.45 in the previous session to $85.91.

The dollar USDJPY, -0.18% fell to 130.17 yen from 130.80 yen on Monday.

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