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Asian shares fought back from early losses on Monday as sharp falls in gold and oil prices briefly spooked sentiment, while the dollar reached four-month highs on the euro after an upbeat U.S. jobs report lifted bond yields.
Markets were shaken early by a sudden dive in gold as a break of $1,750 triggered stop loss sales to take it as low as $1,684 an ounce. It was last down 1.3% at $1,740.
Brent also sank 2% on concerns the spread of the Delta variant of the coronavirus would temper travel demand.
Holidays in Tokyo and Singapore made for thin trading conditions, adding to the volatility. Yet after an initial fall, MSCI’s broadest index of Asia-Pacific shares outside Japan recovered to be up 0.1%.
They were helped by China’s blue chips index which added 1.3%. Japan’s Nikkei was shut but futures were trading a modest 20 points below Friday’s close.
Nasdaq futures slipped 0.3% and S&P 500 futures 0.2%. EUROSTOXX 50 futures and FTSE futures both dipped 0.2%.
Chinese trade data out over the weekend undershot forecasts, while figures out Monday showed inflation slowed to 1% in July offering no barrier to more policy stimulus.
The U.S. Senate came closer to passing a $1 trillion infrastructure package, though it still has to go through the House.
Gold was down on Monday morning in Asia, after sliding as much as 4.4% to a more than four-month low. Strong U.S. jobs data increased fears that the U.S. Federal Reserve would hike interest rates and begin asset tapering earlier than expected.
Gold futures fell 1.19% to $1,742.10 by 1:20 AM ET (5:20 AM GMT), with prices touching $1,684.37, the lowest since Mar. 31, earlier in the session.
Gold broke below its bull-market defining trendline for the first time since 2019, fueling significant stop-outs and melting the yellow metal’s prices, TD Securities analysts said in a note.
The latest U.S. jobs report, released on Friday, said non-farm payrolls rose by a better-than-expected 943,000, while the unemployment rate fell to 5.4%, in July. Investors now await further data, including the core consumer price index (CPI), on Wednesday.
In Asia, China also released data earlier in the day. The country’s CPI rose 1% year-on-year and 0.3% month-on-month, while the producer price index (PPI) rose 9% year-on-year, in July.
The dollar hit a four-month high against the euro on Monday, reversing a recent fall after strong labour market data encouraged investors to bring forward their bets on the Federal Reserve reducing its pandemic-era stimulus.
The greenback strengthened as far as $1.1742 to the single currency, extending a 0.6% pop from Friday, when a strong U.S. jobs report stoked bets that a reduction in asset purchases could start this year and higher interest rates could follow as soon as 2022. It later settled at $1.1761.
Against a basket of currencies, the dollar was down 0.1% on the day as European trading got underway but remained close to four-month highs.
The dollar also climbed as high as 110.37 yen, following a 0.4% rally at the end of last week.
Following the jobs report, the benchmark 10-year Treasury yield jumped 8 basis points on Friday to a two-week high of 1.3053%.
“A strong U.S. employment report on Friday triggered a jump in U.S. bond yields, supporting the U.S. dollar higher,” said Alvin Tan, currencies strategist at RBC Capital Markets.
The two previous months’ payrolls growth were also revised higher, and Tan noted that Fed Chair Jerome Powell had signalled jobs growth as the key indicator for the central bank’s evaluation of the economy’s progress. Fed officials have made a jobs market recovery a condition of tighter monetary policy.
Friday’s non-farm payroll report showed jobs increased by 943,000 in July compared with the 870,000 forecast by economists in a Reuters poll. Numbers for May and June were also revised up.
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