Volkswacht Bodensee - Markets sink as US jobs data fan rate hike bets

A brief rally across trading floors last week gave way to gloom as investors grow increasingly worried that central bank efforts to tame runaway prices will plunge the global economy into recession.

Adding to the stress is the upcoming corporate earnings season, which many fear will show that companies are feeling the pain of tightening monetary policies.

All three main indexes tumbled Friday -- with the Nasdaq off almost four percent -- following news that a net 263,000 US jobs were created in September.

While that was down from August it was more than expected and showed that the labour market remained robust and highlighted the tough job Fed officials face in their battle against four-decade-high inflation.

With the spotlight on a consumer price index reading later in the week, policymakers continue to take a hawkish tone, warning they will not ease up on their rate hikes even if that means causing a recession.

Asia tracked the US losses, with Hong Kong down more than three percent and hefty selling in Sydney, Singapore, Mumbai, Bangkok, Manila, Jakarta and Wellington.

Shanghai dropped as traders returned from a week-long holiday, with rising Covid numbers in the country leading to worries of more economically painful lockdowns ahead of a key Communist Party gathering.

London, Paris and Frankfurt all fell at the open.

Tokyo, Seoul and Taipei were closed.

"The sell-off in equities and the rally in the dollar following Friday's US employment report reflects the concern that the hurdle for a Fed pause is high," said SPI Asset Management's Stephen Innes.

"The rising unemployment rate needed to help bring down CPI inflation will require job losses despite the political fallout that is bound to ensue. Regardless, tightening monetary policy until job losses materialize is on the cards."

He added that there was also nervousness about earnings.

"Unlike June, where earnings were poised to beat expectations, investors are biased towards hitting the sell button as concern around lagged effects of tightening hitting bottom lines now permeate expectations," he said in a note.

The prospect of higher US borrowing costs sent the dollar rallying Friday and it held most of those gains in early Asian trade.

Investors are keeping an eye on the yen, which is edging back to the lows touched last month when the government stepped in with a massive cash injection to support the currency.

The pound weakened even as the Bank of England said it was launching a temporary facility aimed at easing liquidity pressures that arose after the UK government's budget shocked markets last month.

It said it was ready to increase the size of its UK government bond purchases under an emergency measure due to end Friday.

The pound has been hammered -- at one point hitting a record low versus the dollar -- since finance minister Kwasi Kwarteng unveiled a debt-fuelled tax-cutting mini-budget.

Oil prices edged down after seeing their biggest weekly gain since March in reaction to a decision by OPEC and other major producers led by Russia to cut output by two million barrels a day.

The drop Monday came on demand concerns caused by China's Covid flare-ups and more weak data out of Beijing caused by recent lockdowns.

"A slew of weak macroeconomic data that China has released shows that there is very limited room for an economic rebound in the short term, which is hard to provide support for earnings and market confidence," Shen Meng, at investment bank Chanson & Co in Beijing, said.

- Key figures around 0720 GMT -

Hong Kong - Hang Seng Index: DOWN 3.1 percent at 17,194.05

Shanghai - Composite: DOWN 1.7 percent at 2,974.15 (close)

Tokyo - Nikkei 225: Closed for a holiday

London - FTSE 100: DOWN 0.7 percent at 6,942.27

Pound/dollar: UP at $1.1085 from $1.1082 on Friday

Euro/dollar: DOWN at $0.9730 from $0.9743

Euro/pound: DOWN at 87.80 pence from 87.97 pence

Dollar/yen: DOWN at 145.30 yen from 145.38 yen

West Texas Intermediate: DOWN 0.6 percent at $92.10 per barrel

Brent North Sea crude: DOWN 0.6 percent at $97.36 per barrel

New York - Dow: DOWN 2.1 percent at 29,296.79 (close)

-- Bloomberg News contributed to this story --

J.Bergmann--BTB