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Asian Shares Rise Slightly, Dollar Strengthened by Potential Rate Increase

Asian shares experienced modest growth as the dollar strengthened, prompted by U.S. jobs data suggesting a tight labor market. This has reinforced expectations of the Federal Reserve raising interest rates at next month's meeting.

Monitors displaying Asian stock markets

Market Closures and E-mini Futures

Several markets, including Australia, Hong Kong, and European, were closed for Easter. Meanwhile, e-mini futures for the S&P 500 dipped 0.02%, and rate-sensitive Nasdaq saw Nasdaq 100 e-minis decline by 0.25%.

Chinese Shares Slip Amid Geopolitical Tensions

Chinese shares fell on Monday, with the blue-chip CSI300 Index dropping 0.32% and the Shanghai Composite Index sliding 0.16%. The decline comes amid escalating geopolitical tensions surrounding the Taiwan Strait.

U.S. Jobs Data Influences Fed Expectations

U.S. Labor Department data released on Friday revealed an increase of 236,000 nonfarm payroll jobs last month, just below the 239,000 expected by economists. The report also indicated annual wage gains have slowed but remain too high to align with the central bank's 2% inflation target.

Bank of Singapore Chief Economist's Analysis

Mansoor Mohi-uddin, a chief economist at the Bank of Singapore, stated that the Fed's labor market remains too tight to lower inflation to its 2% target without additional interest rate hikes.

Market Predictions for Fed Interest Rate Hike

Markets now predict a 66% chance of a 25 basis point interest rate hike by the Fed at its May 2-3 meeting, up from 49.2% before the jobs data release. Investors will now focus on the upcoming inflation report and minutes from the Fed's last meeting in March.

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FED logo

Recession Fears and Rate Cut Expectations

Investors are increasingly convinced that the Fed will cut rates in the second half of the year to prevent an economic downturn. This is due to concerns over tightened credit conditions following the collapse of Silicon Valley Bank in March.

Analysts See Disconnect Between Fed Path and Market Expectations

Some analysts see a disconnect between the Fed's likely actions and market expectations, with high inflation and a strong labor market making rate cuts unlikely. Citi strategists predict three additional 25 basis point rate hikes.

U.S. Treasury Yields and Dollar Index

The two-year U.S. Treasury yield eased to 3.951%, while the yield on 10-year Treasury notes was 3.372%. The dollar index rose 0.225% to 102.25, moving away from its two-month low of 101.40.

Currency Market Developments

In the currency market, the euro declined 0.06% to $1.0891, and the sterling dropped 0.10% to $1.24. The yen weakened 0.41% to 132.69 per dollar as Japan's new central bank governor, Kazuo Ueda, took office, succeeding Haruhiko Kuroda.