An electronic board displays the Tokyo stock index at a securities office in Tokyo, Japan. Picture: EPA/KIMIMASA MAYAMA
An electronic board displays the Tokyo stock index at a securities office in Tokyo, Japan. Picture: EPA/KIMIMASA MAYAMA

The JSE could open lower on Monday, with Asian equities falling sharply in the wake of better-than-expected US jobs data, which has reduced the likelihood of sharp interest rate cuts from the Federal Reserve.

The US economy added 224,000 jobs in June, data released on Friday shows. That “does not justify a rate cut in normal circumstances” and is likely to make the Fed’s interest rate deliberations more difficult, analysts at OCBC Bank in Singapore said on Monday.

The data reading is probably not enough on its own to rule out a pre-emptive policy decision, but it could temper expectations of an aggressive rate cut later in July, the bank said.

Markets will closely monitor Federal Reserve chair Jerome Powell’s testimony to the Congress on Wednesday and Thursday amid renewed attacks on him by President Donald Trump, who favours sharp rate cuts.

Meanwhile, Morgan Stanley is reducing its exposure to global equities due to expensive valuations and pressure on earnings, Reuters reported.

Hong Kong’s Hang Seng index was 1.6% down on Monday, while the Shanghai Composite slipped 2.5%. Japan’s Nikkei 225 fell 1%, Korea’s Kospi 1.7%, and Australia’s main benchmark 1%.

Chinese internet and gaming giant Tencent dropped 1.8% in Hong Kong, suggesting a weak opening for major shareholder and JSE-behemoth Naspers.

JSE-heavyweight BHP Group was 1.1% down in Australia.

No major company results or data releases are expected locally on Monday. Elsewhere, investor confidence numbers are due from the EU, while consumer credit data is expected from the US.

The rand, which came under pressure due to the US jobs reading, remained on the back foot on Monday morning. The local currency was at R14.20/$, R17.79/£, and R15.94/€.

hedleyn@businesslive.co.za