Asian markets drop as US jobs fan rate worries

After a forecast-busting US jobs report fueled expectations of more Federal Reserve interest rate hikes, Asian markets mostly fell Monday, while the dollar extended gains.

Geopolitical concerns were added to the gloomy mood after the US shot down a suspected Chinese spy balloon that had been floating across the country for days.

The rally that began in January has come to a halt this month as investors prepare for a prolonged period of high borrowing costs aimed at lowering inflation from multi-decade highs.

The Fed's softer tone regarding its monetary tightening campaign had allowed market participants to consider a pause, or even a cut, later in the year.

However, data released on Friday showed that more than 500,000 new jobs were created in the United States last month, nearly doubling the December figure and far exceeding the 188,000 expected.

According to government data, unemployment has also reached its lowest level since 1969.

The reading showed that the world's largest economy remained strong despite nearly a year of rate hikes and rising prices, indicating that the Fed still had a lot of work to do to keep inflation under control.

"We are concerned that this type of jobs report will definitely hold the Fed to a higher-for-longer path," said Lisa Erickson of US Bank Wealth Management.

"There are of course other data points that are going to come before the next meeting, but it certainly puts a placeholder that the labour market continues to run some risk of being extremely tight."

Traders now expect the Fed to raise interest rates to more than 5% before stopping.

And San Francisco Fed President Mary Daly stated that she is willing to continue raising interest rates for some time.

On Wall Street, all three major indexes fell, with the Nasdaq down more than 1%, as tech firms suffered from disappointing earnings from Amazon, Alphabet, and Apple.

In Asia, losses continued, with Hong Kong down 1.9%, while Shanghai, Sydney, Seoul, Taipei, Manila, and Jakarta were also down.

However, gains were recorded in Tokyo and Singapore.

Traders were keeping an eye on China-US relations following the weekend shooting down of the giant balloon.

Pentagon officials described the airship as a "high-altitude surveillance balloon", adding, without elaboration, that Washington had taken steps to block it from collecting sensitive information.

Beijing reacted angrily, warning that the move had "seriously impacted and damaged" relations, despite earlier claims that it was a weather balloon that had been blown off course.

The incident strained already strained relations, prompting Secretary of State Antony Blinken to cancel a planned rare trip to Beijing aimed at calming rising tensions.

On currency markets, the prospect of much higher rates caused the dollar to surge against its major peers on Friday, and it continued to strengthen in Asia.

The yen was further weakened by news that deputy governor Masayoshi Amamiya could succeed Bank of Japan Governor Haruhiko Kuroda later this year. Observers said such a move could see the central bank sticking to the ultra-loose monetary policy that has kept it from lifting interest rates.