Asian equities exhibited little movement today, with fluctuations observed in key markets as investors positioned themselves defensively ahead of crucial U.S. economic data due later this week. The dollar and yen saw gains against their counterparts, reflecting caution as traders anticipate insights into potential Federal Reserve rate cuts.
In Asia, stocks in Australia, Hong Kong, and South Korea experienced declines, while mainland China shares displayed volatility. Japanese equities trimmed earlier gains but remained among the top performers in the region. Despite a stronger yen, Japan’s stock market still saw limited progress. A global stock index reversed its earlier gains.
European equity futures showed minimal change, and U.S. contracts declined ahead of Wall Street’s reopening after the Labor Day holiday. U.S. Treasuries also remained relatively stable.
The U.S. dollar index reached a two-week high, marking its fifth consecutive daily gain. Meanwhile, the yen’s recent strengthening ended a four-day period of depreciation against the dollar.
Pimco Japan Ltd. anticipates that the Bank of Japan may implement another rate hike as early as January. However, Julius Baer predicts that further hikes may not result in a stronger yen. Mark Matthews, head of Asia research, noted on Bloomberg Television, “Our assumption is that the Bank of Japan policy rate will be half a percent by March next year and the fed funds rate will be 4.5% — that’s still 400 basis points of difference, which is very wide. On that basis we do see the yen weakening.”
The South Korean won weakened following August inflation data, which revealed the slowest year-over-year price increase since 2021. The Australian dollar fell in response to declining iron ore prices.
Market attention is focused on U.S. manufacturing data scheduled for later today, which is expected to provide insights into the health of the U.S. economy. This week is packed with economic reports, culminating on Friday with the nonfarm payrolls data.
Markets are anticipating the beginning of the U.S. easing cycle this month, with a roughly one-in-four chance of a 50 basis-point cut, according to Bloomberg data. Valentin Marinov, head of G-10 FX strategy at Credit Agricole CIB, cautioned on Bloomberg Television, “The markets may be leaning too dovish into the September Fed meeting. The dollar could recoup some ground once the markets realize that the Fed will move more cautiously.”
JPMorgan Chase & Co. strategists warned that any rate cuts by the Fed might not boost the equity market, given that such actions would likely be in response to slowing growth. Mislav Matejka of JPMorgan Chase emphasized, “We are not out of the woods yet. Sentiment and positioning indicators look far from attractive, political and geopolitical uncertainty is elevated, and seasonals are more challenging.”
In Asia, traders are closely monitoring economic signals from China. Data released on Saturday indicated that Chinese factory activity contracted for the fourth consecutive month in August, highlighting challenges for the world’s second-largest economy in meeting its growth targets. The slowdown has intensified calls for additional government stimulus, as inventories of essential raw materials continue to accumulate.
Lorraine Tan, director of Asia equity research at Morningstar, suggested that a stabilization in Chinese housing demand next year could be a pivotal moment for market confidence in the country’s equities.
In commodities, oil prices edged higher after Libya declared force majeure at a major oil field, leading to a significant reduction in global daily supplies. The U.S. is also preparing to impose new sanctions on Venezuelan officials in response to Nicolás Maduro’s contested reelection.
Key Economic Events This Week:
1.Switzerland GDP and CPI, Tuesday
2.U.S. construction spending and ISM Manufacturing Index, Tuesday
3.Australia GDP, Wednesday
4.China Caixin Services PMI, Wednesday
5.Euro-zone HCOB Services PMI and PPI, Wednesday
6.Fed’s Beige Book, Wednesday
7.Eurozone retail sales, Thursday
8.Germany factory orders, Thursday
9.U.S. initial jobless claims, ADP employment, ISM Services Index, Thursday
10.Eurozone GDP, Friday
11.U.S. nonfarm payrolls, Friday
Market Movements:
Stocks:
1.S&P 500 futures fell 0.1%
2.Nasdaq 100 futures fell 0.3%
3.Dow Jones Industrial Average futures fell 0.2%
4.MSCI Asia Pacific Index was little changed
5.MSCI Emerging Markets Index fell 0.4%
6.Japan’s Topix rose 0.5%
7.Australia’s S&P/ASX 200 fell 0.1%
8.Hong Kong’s Hang Seng fell 0.5%
9.Shanghai Composite fell 0.5%
10.Euro Stoxx 50 futures were little changed
Currencies:
1.Bloomberg Dollar Spot Index rose 0.1%
2.Euro fell 0.1% to $1.1056
3.Japanese yen rose 0.4% to 146.31 per dollar
4.Offshore yuan was little changed at 7.1228 per dollar
5.British pound fell 0.2% to $1.3118
Cryptocurrencies:
1.Bitcoin rose 0.3% to $59,203.86
2.Ether fell 1.3% to $2,520.82
Bonds:
1.Yield on 10-year Treasuries was little changed at 3.91%
2.Germany’s 10-year yield advanced four basis points to 2.34%
3.Britain’s 10-year yield advanced four basis points to 4.05%
4.Australia’s 10-year yield was little changed at 4.00%
Commodities:
1.Spot gold fell 0.2% to $2,495.22 an ounce
2.West Texas Intermediate crude rose 0.8% to $74.13 a barrel
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