Asian markets dip after Wall Street had its worst week in nearly 18 months

Asian stocks fell Monday after another rout hit Wall Street on Friday, as a highly anticipated update on the US job market came in weak enough to add to worries about the economy.

The Nikkei 225 index was hovering around its lowest level in almost a month during morning trading, and it slipped 0.5 per cent to close at 36,215.75. Japan's gross domestic product grew by an annualised 2.9 per cent in the second quarter, according to revised data from the Cabinet Office released on Monday. This was below expectations.

“Any broader risk aversion may have an amplified effect on Japanese equities, with safe-haven flows potentially supporting the yen, which is looked upon as negative for the country's exporters,” Yeap Jun Rong, market strategist at IG, said in a commentary.

The US dollar was trading at less than 143 Japanese yen in Monday trading.

Stocks in Chinese markets also racked up losses after worse-than-expected inflation data disappointed investors. Data from the National Bureau of Statistics on Monday showed deflationary pressure continues to loom large, as the consumer price index grew by 0.6 per cent year-on-year in August, while the producer price index, which measures costs for manufacturing, was down 1.8 per cent compared to August last year.

Hong Kong's Hang Seng index declined 2.2 per cent to 17,068.34 and the Shanghai Composite index was down 1.2 per cent, at 2,731.70.

Australia's S&P/ASX 200 dipped 0.3 per cent to 7,988.10. South Korea's Kospi lost 0.4 per cent to 2,534.11.

US futures and oil prices were higher.

On Friday, the S&P 500 dropped 1.7 per cent and ended at 5,408.42 to close out its worst week since March 2023. Broadcom, Nvidia and other tech companies drove the market lower amid ongoing concerns that their prices soared too high in the boom around artificial intelligence, and they dragged the Nasdaq composite down by a market-leading 2.6 per cent to 16,690.83.

The Dow Jones Industrial Average dropped 1 per cent to 40,345.41.

Sharp swings also hit the bond market, where Treasury yields tumbled, recovered and then fell again after the jobs report showed US employers hired fewer workers in August than economists expected. It was billed as the most important jobs report of the year, and it showed a second-straight month where hiring came in below forecasts. It also followed recent reports showing weakness in manufacturing and other areas in the economy.

Such a softening of the job market is actually just what the Federal Reserve and its chair, Jerome Powell, have been trying to get in order to stifle high inflation, “but only to a certain extent and the data is now testing Chair Powell's stated limits,” said Scott Wren, senior global market strategist at Wells Fargo Investment Institute.

Friday's data raised questions about how much the Federal Reserve will cut its main interest rate by at its meeting later this month. The Fed is about to turn its focus more toward protecting the job market and preventing a recession after keeping the federal funds rate at a two-decade high for more than a year.

Cuts to interest rates can boost investment prices, but the worry on Wall Street is that the Fed may be moving too late. If a recession does hit, it would undercut corporate profits and erase the benefits from lower rates.

Still, the jobs report did include some encouraging data points. For one, the unemployment rate improved to 4.2 per cent from 4.3 per cent a month earlier. That was better than economists expected. And even if August's hiring was weaker than forecast, it was still better than July's pace.

All the uncertainty sent Treasury yields on a wild ride in the bond market as traders tried to handicap the Fed's next moves.

The two-year Treasury yield initially fell as low as 3.64 per cent after the release of the jobs report, before quickly climbing back above 3.76 per cent. It then dropped back to 3.66 per cent following Waller's comments, down from 3.74 per cent late Thursday.

In energy trading, benchmark US crude rose 66 cents to $68.33 a barrel. Brent crude, the international standard, added 74 cents to $71.80 a barrel.

In currency trading, the US dollar edged up to 142.86 Japanese yen from 142.27 yen. The euro cost $1.1069, down from $1.1083.