Stock markets in Asia opened the week lower following an upbeat job report from the U.S. last week, which alerted investors about the possibility of more interest rate hikes by the Federal Reserve.
MSCI's broadest index of Asia-Pacific shares, minus Japan, went down by 2.22 percent to 541.40 near the closing period. The index ranged between 498.42 to 562.95 over the past 52 weeks.
The Kospi index in South Korea went down 1.70 percent or 42.21 points to close at 2,438.19. China's blue-chip stocks declined by 1.32 percent or 54.75 points to 4,086.88 at closing. Hong Kong's Hang Seng also decreased by 2.02 percent or 438.31 to 21,222.16.
Japan's Nikkei index — which measures Japan's top 225 companies — was among the few gainers in Asia, gaining 0.67 percent or 184.19 points to close at 27,693.65. Analysts said Japanese investors were "hopeful" that the Bank of Japan would maintain its low-interest rates.
S&P 500 and NASDAQ futures slid by 0.3 percent following strong January job reports, which made investors question earlier predictions that the Fed would cease the rate hikes soon. Analysts also said investors did not believe that the Fed would start cutting rates this year, even though last week, experts predicted that it might happen as early as the end of 2023.
"The employment report changed the landscape of labor markets, increasing the possibility of a soft-landing scenario where the economy avoids a severe contraction while inflation/wage growth continues to moderate," consulting firm Nomura said in a report.
"We believe economic conditions will remain too firm for the Fed to cut rates in 2023."
Meanwhile, in Europe, the Eurostoxx 50 and FTSE futures dropped by 0.6 percent and 0.3 percent, respectively.
The strong job report also negatively affected bond markets, leading to a sharp increase in the U.S. dollar value. The U.S. dollar index jumped by 1.2 percent to 103.050.
Oil futures rose slightly in Asia on Monday following a steep three percent plunge. Brent crude traded at $80.16 a barrel or rising 22 cents, while U.S. crude rose by 15 cents to $73.54 a barrel.
U.S. economic outlook
The yields on two-year Treasury notes increased from 4.09 percent to 4.35 percent. Meanwhile, the 10-year Treasury yields rose to 3.55 percent.
Before the job report, many thought March's interest rate hike would be the last in this tightening cycle. However, investors now predict that there will be another hike in May. According to consensus, the interest rate will peak at five percent.
Fed chief Jerome Powell and several other central bank officials are due to address the public on Tuesday. Analysts predicted they would deliver a hawkish tone, indicating a prolonged monetary tightening cycle. The European Central Bank and the Bank of England will also make appearances in their respective jurisdictions.
JPMorgan's chief of economic research, Bruce Kasman, said the global manufacturing sector had begun recovery, reaching a five-month high of 49.1 in January, which according to him, would "decisively quiet" an impending recession outlook. He added that the U.S. had not missed out on the momentum for economic growth at the beginning of the year.
"Importantly, we see material risk that developed market rates will need to rise well above market estimates of terminal rates for the cycle, even as we expect the Fed to signal a pause next quarter," Kasman added.
Higher interest rates, and therefore bond yields, will stretch the valuations of equities and may lead to a pessimistic market outlook.