Some knee-jerk reactions possible, but strong fund inflows to continue: Radhika Rao, India Economist of DBS
In a chat with ET Now,
Radhika Rao, India Economist of DBS
said Fed will continue with its rate cut path despite recent weak US jobs data. Edited excerpts.
What are your views on the US jobs data, the US economy is not adding a lot of jobs?
It is pretty clear that there was some whether effect that impacted the numbers. Markets were not expecting a big headline jump that's why they didn't react even on the weak numbers. We are also looking at the three-months moving average rather than a point target and usually this payrolls data tends to be a bit choppy and that has been the main reason behind this month's low figure, but markets are obviously looking beyond these figures.
Even if you take a three-month average, it is still within the acceptable range for the US Fed so I do not think it is going to play a major role in pushing back the Fed in terms of their normalisation path. I do not expect a game changer, Fed will continue to normalise rates with three more hikes this year. Further, as unemployment rate is coming down, the surplus pool of labour is also becoming lesser so I do not think one can realistically expect payrolls data to be stronger in coming months.
What do you think about last week's knee-jerk reaction on US strike in Syria? Do you think that adjustment is over?
Geo-politically, it was unexpected and that's why it resulted into initial turbulence but it has settled down. Now, people are waiting for Russia, Syria's reaction. Korean Peninsula is another area to watch for. US has already send aircraft carriers in the troubled waters. So, things can take an ugly turn any time. But, the fundamental reasons why markets are able to hold this up pretty well is because US is doing well, inflation is looking up, payrolls data is better, employment rate is coming down and growth is looking better.
Emerging markets in Asia are also seeing a lot of positive signs in terms of growth. Export numbers are rising in Asia including north Asia and Southeast Asia; India is also fairing well. The overall environment is fairly positive. We may see knee-jerk reactions as and when any fresh risk resurfaces but other than that I do not think there is going to be any lasting impact to derail the US Fed's normalisation route or on strong fund inflows into Asian markets. Besides short-term volatility, the backdrop is still quite positive.
What are your views on the US jobs data, the US economy is not adding a lot of jobs?
It is pretty clear that there was some whether effect that impacted the numbers. Markets were not expecting a big headline jump that's why they didn't react even on the weak numbers. We are also looking at the three-months moving average rather than a point target and usually this payrolls data tends to be a bit choppy and that has been the main reason behind this month's low figure, but markets are obviously looking beyond these figures.
Even if you take a three-month average, it is still within the acceptable range for the US Fed so I do not think it is going to play a major role in pushing back the Fed in terms of their normalisation path. I do not expect a game changer, Fed will continue to normalise rates with three more hikes this year. Further, as unemployment rate is coming down, the surplus pool of labour is also becoming lesser so I do not think one can realistically expect payrolls data to be stronger in coming months.
What do you think about last week's knee-jerk reaction on US strike in Syria? Do you think that adjustment is over?
Geo-politically, it was unexpected and that's why it resulted into initial turbulence but it has settled down. Now, people are waiting for Russia, Syria's reaction. Korean Peninsula is another area to watch for. US has already send aircraft carriers in the troubled waters. So, things can take an ugly turn any time. But, the fundamental reasons why markets are able to hold this up pretty well is because US is doing well, inflation is looking up, payrolls data is better, employment rate is coming down and growth is looking better.
Emerging markets in Asia are also seeing a lot of positive signs in terms of growth. Export numbers are rising in Asia including north Asia and Southeast Asia; India is also fairing well. The overall environment is fairly positive. We may see knee-jerk reactions as and when any fresh risk resurfaces but other than that I do not think there is going to be any lasting impact to derail the US Fed's normalisation route or on strong fund inflows into Asian markets. Besides short-term volatility, the backdrop is still quite positive.
