Global equity markets showed signs of continued weakness as investors awaited the upcoming US payrolls report to better understand potential Federal Reserve policy adjustments. Euro Stoxx 50 futures decreased by 0.2%, and US equity futures also fell, while the MSCI Asia Pacific Index retraced much of its earlier 0.8% gain, with notable declines in Japan and Hong Kong.
Treasury yields increased following a previous decline, driven by speculation on the Federal Reserve’s potential rate cuts due to a slowing US labor market. The dollar index stabilized after a 0.3% decline on Wednesday. The yen appreciated following an increase in Japan’s real wages, which bolstered expectations for a Bank of Japan rate hike.
Traders are adopting a wait-and-see approach before the crucial US payrolls report on Friday, which will significantly influence the Fed’s decision later this month. Market reactions to US economic data have been pronounced amid growing recession concerns and skepticism about the artificial intelligence sector, notably impacting Nvidia Corp., which experienced its largest two-day drop since October 2022.
Carol Kong, a currency strategist at Commonwealth Bank of Australia, noted, “Financial markets remain cautious ahead of the US payrolls report, which could influence the case for a 50 basis point rate cut by the Fed.” She added that USD/JPY could be vulnerable to declines if US labor market conditions worsen, given the differing monetary policies of the Fed and the Bank of Japan.
Sentiment towards Chinese equities remains negative, with JPMorgan Chase & Co. downgrading its recommendation due to weak policy support and potential volatility from the US presidential election. A gauge of Chinese shares in Hong Kong fell to its lowest since mid-August.
Hebe Chen, an analyst at IG Markets Ltd., commented, “Asian markets are balancing concerns over upcoming US job data, which might echo fears from early August, with a pessimistic outlook on the global tech sector following Nvidia’s decline.”
With the Federal Reserve expected to begin rate cuts soon, Friday’s US employment data will be pivotal in determining the scale of these cuts. Fed Chair Jerome Powell has emphasized concerns over labor market risks more than inflation. Eddy Loh, Chief Investment Officer at Maybank Group Wealth Management, told Bloomberg TV, “We believe the US soft landing scenario remains intact, but the next few months may be challenging for markets. A 50-basis-point cut could be perceived negatively if it indicates underlying economic concerns.”
In commodities, oil prices rose after a recent low, driven by a significant draw in US crude stockpiles. Gold traded around $2,500, finding support following recent US job openings data.
Key Events This Week:
1.Eurozone retail sales, Thursday
2.US initial jobless claims, ADP employment, ISM services index, Thursday
3.Eurozone GDP, Friday
4.US nonfarm payrolls, Friday
5.Fed’s John Williams speaks, Friday
Market Movements:
Stocks:
1.S&P 500 futures: little changed
2.Nasdaq 100 futures: -0.1%
3.Japan’s Topix: -0.3%
4.Australia’s S&P/ASX 200: +0.3%
5.Hong Kong’s Hang Seng: -0.5%
6.Shanghai Composite: -0.1%
7.Euro Stoxx 50 futures: -0.1%
Currencies:
1.Bloomberg Dollar Spot Index: little changed
2.Euro: $1.1079
3.Japanese Yen: +0.2% to 143.43 per dollar
4.Offshore Yuan: +0.2% to 7.1002 per dollar
Cryptocurrencies:
1.Bitcoin: -1.4% to $57,233.15
2.Ether: -1.7% to $2,413.91
Bonds:
1.10-year Treasuries yield: 3.76%
2.Australia’s 10-year yield: -2 basis points to 3.93%
Commodities:
1.West Texas Intermediate crude: +0.3% to $69.44 per barrel
2.Spot gold: little changed
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