SYDNEY- Stocks skidded lower in Asia on Monday after a surprise drop in US unemployment quashed any thought of a pivot on policy tightening ahead of a reading on inflation which is expected to see core prices move higher again.
Geopolitical tensions added to the uncertainty as markets waited to see how the Kremlin might respond to the blast that hit Russia’s only bridge to Crimea.
Holidays in Japan and South Korea made for thin trading in Asia, while the Treasury market is also shut on Monday.
S&P 500 futures led the early action with a drop of 0.5 percent, while Nasdaq futures fell 0.6 percent as US earnings season kicks off later this week.
EUROSTOXX 50 futures lost 0.7 percent, while FTSE futures fell 0.5 percent.
MSCI’s broadest index of Asia-Pacific shares outside Japan shed 1.0 percent. Nikkei futures traded at 26,600 compared to Friday’s cash close of 27,116.
Chinese blue chips were flat after a survey showed the first contraction in services activity in four months.
China’s semiconductor index fell more than 5 percent after Washington published a sweeping set of export controls, including a measure to cut China off from certain semiconductor chips made anywhere in the world with US equipment.
Wall Street sank on Friday after an upbeat payrolls report seemed to seal the deal on another outsized rate hike from the Federal Reserve.
Futures imply a more than 80 percent chance of rates rising by 75 basis points next month, while the European Central Bank (ECB) is expected to match that and the Bank of England to hike by at least 100 basis points.
“We are in the midst of the largest and most synchronized tightening of global monetary policy in more than three decades,” said Bruce Kasman head of economic research at JPMorgan, who expects hikes of 75 basis points from all three of the central banks.
“The September CPI report should show a moderation in goods prices that is a likely harbinger of a broader slowing in core inflation,” he said. “But the Fed will not be responsive to a whisper of inflation moderation as long as labor markets shout tightness.”
