U.S. CPI seen sealing case for early Fed taper.
Oil prices went up after six weeks of losses.
SYDNEY, Dec 6 Reuters -- Asian share markets got a cautious start on Monday after Omicron emerged in more countries and investors faced a week-long wait for key U.S. inflation figures that could decide the course of interest rates.
A mixed U.S. jobs report did not shake market expectations of a tighter Federal Reserve and consumer price report due on Friday, which is likely to make the case for an early tapering.
Omicron was a concern, as it spread to about one-third of U.S. states, though there were reports from South Africa that cases there had mild symptoms. Early trading was sluggish as MSCI's broadest index of Asia-Pacific shares outside Japan fell 0.2%.
Japan's Nikkei slowed by 0.7%, even as the government considered raising its economic growth forecast to account for a record $490 billion stimulus package.
Wall Street was looking to rally after Friday's late slide, with S&P 500 futures adding 0.4% and Nasdaq futures 0.1%. The U.S. payrolls had underwhelmed in November, but the survey of households was far stronger with a 1.1 million jump in unemployment to 4.2%. According to Barclays economist Michael Gapen, we think the Fed will view the economy as closer to full employment than previously thought.
We expect an accelerated taper at the December meeting, followed by the first rate hike in March. In 2022, we expect three 25 basis point hikes. The futures market is almost fully priced for a hike to 0.25% by May and 0.5% by November.
BofA chief investment strategist Michael Hartnett is bearish on equities for 2022, because of the hawkish outlook and tightening of financial conditions.
He favors real assets, real estate, commodities, volatility, cash and emerging markets, while bonds, credit and equity could struggle.
Shorter-term Treasury yields are pushed higher but the longer-term has rallied as investors wager earlier start to hikes will mean slower economic growth and inflation over time and a lower peak for the funds rate.
The spread over two-years was shrinking as the smallest this year, as a result of the ten-year U.S. yields plunged almost 13 basis points last week and were last at 1.38%.
The rise in short-term rates has helped underpin the U.S. dollar, particularly against growth-leveraged currencies, which are seen as vulnerable to the spread of the Omicron variant.
The U.S. dollar hit 13 month peak on the Australian and New Zealand dollar, but its index was relatively steady on the majors at 96.214.
The euro was holding at $1.1303 and above its recent trough of $1.1184, while the dollar lost ground on the safe haven yen to 112.94.
On Saturday, a fifth of its value was lost due to a profit-taking and macro-economic concerns that caused nearly a billion dollars worth of selling across cryptocurrencies.
The price of bitcoins was $49,436, which was as low as $41,967 over the weekend.
In commodities, gold found some support from the decline in bond yields, but has been trading sideways for several months in a $1,720 1,870 range. It was stable early on Monday at $1,783 an ounce.
Oil prices have been volatile because supply constraints are warped by worries about demand as Omicron spreads. Lately, prices of Brent and U.S. crude have fallen for six weeks in a row.
The market was trying to bounce back on Monday, with Brent rising $1.29 to $71.17 a barrel, while U.S. crude added $1.30 to $67.56 per barrel.