(Bloomberg) — Stocks are poised to start the week under pressure after a robust US jobs report left the door open for the Federal Reserve to maintain an assertive stance on inflation.
Futures fell in Japan and Australia. The S&P 500 retreated for an eighth week in nine. Chinese shares traded in the US declined, which may weigh on stocks in Hong Kong.
The dollar traded within tight ranges versus major currencies at the start of the week in Asia Monday. The pound pared initial gains amid risks around a confidence vote on British Prime Minister Boris Johnson’s leadership.
Oil will be in focus after Saudi Arabia raised oil prices for its biggest market of Asia by more than expected, and the US was considering allowing more sanctioned Iranian oil onto global markets to counter the drop in Russian supplies. Crude rose to near $120 a barrel Friday and eked out a sixth straight week of gains after OPEC+ delivered only a modest increase in output at a meeting that failed to soften supply shortage worries.
Treasury yields climbed and the dollar strengthened Friday after May hiring data topped expectations. The next focus is May consumer prices this week to gauge whether US inflation has peaked.
Investors are fretting that a restrictive Fed could plunge the US economy into recession. The jobs report quelled some concern that the economy is slowing too sharply, but also strengthened the view that the Fed will keep hiking rates to douse inflation. Market-derived odds for a third 50 basis point increase in September held steady near 85%.
“The critical issue for markets is whether inflation can be brought under control by central banks without generating a recession,” Shane Oliver, head of investment strategy and chief economist at AMP Capital, said in a note. “Shares are likely to see continued short-term volatility as central banks continue to tighten to combat high inflation, the war in Ukraine continues and fears of recession remain.”
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