HONG KONG (AP) - World stocks declined on Monday following a drop in U.S. stocks, as positive job market news heightened inflation concerns. The future for the S&P 500 slid 0.9%, while the Dow Jones Industrial Average saw a loss of 0.4%. Investors reacted to the implications of a robust labor market, which, while beneficial for job seekers, raises the likelihood of sustained inflation that could impact monetary policy.
In the U.S., crude oil prices surged by more than $1 per barrel after the Biden administration announced expanded sanctions against Russia’s energy sector, crucial for the country’s economy amid its ongoing war in Ukraine. U.S. benchmark crude oil rose by $1.48 to $78.06 per barrel, while Brent crude, the international benchmark, increased by $1.38 to $81.14 per barrel.
Early trading in Europe reflected a negative sentiment; Germany’s DAX fell 0.7% to 20,074.11, and France’s CAC 40 dropped 0.7% to 7,379.02. Britain’s FTSE 100 decreased by 0.4% to 8,217.34. Meanwhile, Japanese markets remained closed due to a holiday, and in China, despite reported export growth of 10.7% in December, stock markets failed to rally. Hong Kong’s Hang Seng index fell 1% to 18,874.14, and the Shanghai Composite declined by 0.3% to 3,160.76.
Analysts like Stephen Innes of SPI Asset Management attributed the cautious mood to uncertainty about how Asian economies, particularly China, would navigate the trade policies anticipated from President-elect Donald Trump’s "America First" agenda. Australia’s S&P/ASX 200 also experienced a drop of 1.2% to 8,191.90, while South Korea’s Kospi shed 1% to 2,489.56.
The previous Friday saw significant declines in U.S. stock indices, with the S&P 500 tumbling 1.5%, marking its fourth losing week out of five. Both the Dow Jones Industrial Average and the Nasdaq composite experienced losses of 1.6%. This downturn correlated with increased bond market yields, driven by a report showing that U.S. employers added many more jobs than expected in the previous month.
While job growth is positive, it brings potential inflationary pressures that could influence the Federal Reserve's decisions on interest rates, which are crucial for both economic stimulation and investment valuations. The Fed has suggested it may opt for fewer rate cuts this year than previously anticipated due to inflation concerns, partly linked to the potential for new tariffs and policies under the forthcoming Trump administration.
The jobs report from last Friday indicated robust hiring, but it also revealed weaknesses in the manufacturing sector, which raises questions about the overall stability of job growth. This has contributed to a cooling of the stock market, where significant gains were previously driven by expectations of continuous rate cuts from the Fed. If these cuts are fewer than anticipated, stock prices may either need to decline or corporate profits would have to rise significantly to justify current valuations.
In currency trading, the U.S. dollar fell to 157.41 Japanese yen, down from 157.82 yen, and the euro decreased to $1.0196 from $1.0244. Economic indicators are closely watched as they have implications for global markets and monetary policy directions.
