Ahead of Fed policy rate decisions, Asian Markets started off mixed on Monday as Omicron variant of the Coronavirus was detected in more countries.
Early trade was sluggish as MSCI's broadest index of Asia-Pacific shares outside Japan inched down 0.2 percent, while Japan's Nikkei fell 0.7 percent, even as the government considered raising its economic growth forecast to account for a record $490 billion stimulus package. Shanghai Composite (SSEC) up 0.94 percent, while Hang Seng (HK50) fell slightly at 6:25 am (IST).
Wall Street was looking to rally after Friday's late slide, with S&P 500 futures adding 0.4 percent and Nasdaq futures 0.1 percent.
Omicron remained a concern as the variant spread to about one-third of U.S. states, though there were reports from South Africa that cases there had mild symptoms. [
While headline US payrolls had underwhelmed in November, the survey of households was far stronger with a 1.1 million jump in jobs taking unemployment down to 4.2 percent.
"We think the Fed will view the economy as much closer to full employment than previously thought," Reuters quoted as saying Barclays economist Michael Gapen.
"Hence, we expect an accelerated taper at the December meeting, followed by the first rate hike in March. We continue to expect three 25 basis point hikes in 2022."
The futures market is almost fully priced for a hike to 0.25% by May and 0.5 percent by November.
The hawkish outlook is one reason BofA chief investment strategist Michael Hartnett is bearish on equities for 2022, expecting a "rates shock" and a tightening of financial conditions.
He favours real assets, real estate, commodities, volatility, cash and emerging markets, while bonds, credit and equities could struggle.
For now, short-term Treasury yields are being pushed higher but the longer-end has rallied as investors wager an earlier start to hikes will mean slower economic growth and inflation over time and a lower peak for the funds rate.
Ten-year US yields dived almost 13 basis points last week and were last at 1.38 percent, shrinking the spread over two-years to the smallest this year.
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 US dollar hit 13-month peaks on the Australian and New Zealand dollars but its index was relatively steady on the majors at 96.214.
The euro was holding at $1.1303 and above its recent trough at $1.1184, while the dollar lost ground on the safe haven yen to 112.94.
Bitcoin shed a fifth of its value on Saturday as a profit-taking and macro-economic concerns triggered nearly a billion dollars worth of selling across cryptocurrencies.
-With agency inputs