Asian Stocks Fall on U.S. Data Expectations
Asian stocks fell on Wednesday, halting a strong rally in global stocks as they waited for important U.S. economic data. Bond yields and the dollar fell on expectations of interest rate cuts ahead of policymakers.
S&P 500 Ends Gain
The S&P 500 (.SPX), which had been on track for eight straight sessions of gains, was down 0.2% overnight. MSCI's broad index of Asia-Pacific shares excluding Japan (.MIAPJ0000PUS) also lost 0.5%. Meanwhile, U.S. and European index futures showed modest gains, up around 0.2%.
Hang Seng and JD.com under pressure
Hong Kong's Hang Seng (.HSI) fell 1%, helped by a sharp 10% drop in JD.com (9618.HK) shares after its largest shareholder, Walmart, decided to sell a significant portion of its stake.
Japan's Nikkei struggles with resistance
Japan's Nikkei (.N225) fell 1% at the open, hitting resistance at 38,000 after recently rebounding from its early August decline. However, the index had partially recovered by midday, paring its losses to 0.3%.
Experts predict possible changes
The recent sell-off in stocks has bottomed out, with recession fears replaced by hopes for a softer slowdown, according to Bank of Singapore analyst Mo Siong Sim. However, he notes that markets need confirmation before they can stabilize, and that confirmation should come from new data.
US data on the horizon
Investors will continue to focus on preliminary US employment data due out later on Wednesday. The data is expected to be revised downwards, which could put pressure on interest rates. The Federal Reserve minutes are also expected to be released, which analysts believe will confirm the regulator's appetite for easing.
Index expectations and their impact on global markets
Investors will be closely watching the publication of both US and global purchasing managers' indices on Thursday. These data promise to have a significant impact on markets, shaping future expectations for economic growth and monetary policy.
Dollar Loses Ground as Gold and Yen Rise
The dollar's weakness has served as a catalyst for a sharp rise in gold prices, which have reached new records. Against this backdrop, the Japanese yen has strengthened to 145.67 per dollar, up 1.6% on the week and an 11% rebound from its 38-year low last month.
The Euro and Rate Cut Prospects
The euro has been on a strong run, up nearly 3% since early August. At $1.1132 in Asian trading, the euro hit its highest since December last year, indicating an attempt to break key chart levels.
Interest rate futures point to a strong chance of the Federal Reserve cutting its benchmark rate by 25 basis points next month, with a one-third chance of a 50 basis point cut. Investors are pricing in a rate cut of nearly 100 basis points this year and expecting a similar cut next year.
Dollar under pressure: further weakness likely
Rabobank strategist Jane Foley says the dollar's recent weakness is likely due to rising expectations for easing from the Federal Reserve. However, she warns that these hopes may be overdone, with the risk of a short-term decline in EUR/USD below $1.10.
A look ahead to upcoming speeches and regional currencies
Investors are also looking ahead to Fed Chairman Jerome Powell's speech at the Jackson Hole Symposium on Friday, which could provide further clues as to where the Fed is headed. Meanwhile, the Australian and New Zealand dollars have shown solid gains, reaching $0.6747 and $0.6157 respectively, reflecting their positive momentum amid global economic developments.
US Bonds and Commodities: Strong Positions
Equity markets continued to be supported by bonds, with the US 10-year Treasury yield falling to 3.81% and the two-year yield holding steady at 3.99%. These figures suggest cautious optimism among investors awaiting economic data.
Commodities Resilience and China's Response
Commodities prices stabilised. Brent crude futures settled at $77.12 a barrel, indicating a recovery from recent wobbles. Iron ore in the Dalian market also hit a local bottom, helped by reports that China plans to allow local governments to buy unsold homes. The move is aimed at supporting the housing market, an important signal for the global steel market, where China plays a key role.
Impact of Chinese construction on global markets
Steel markets are sensitive to any developments in the construction industry in China, the world's largest consumer of the metal. Following the news from China, shares of major miners such as BHP, Rio Tinto and Fortescue Metals were stable in Australian markets, reflecting investor confidence in a recovery in demand.
Gold holds close to records
Gold prices remain close to the record highs set on Tuesday, hovering around $2,516 an ounce. The precious metal remains an attractive asset for investors amid global economic uncertainty.
Asia's central banks: decisions awaited
In emerging markets, attention is focused on central bank meetings in Thailand and Indonesia on Wednesday. Although neither country is expected to cut rates before the US Federal Reserve, their decisions could have an impact on regional markets.
Chinese Stocks Under Pressure After Walmart News
The yen continued to strengthen, reaching 145.5 per dollar, which, along with weak sentiment in Japanese stock markets, put pressure on stocks. At the same time, news that Walmart plans to sell its stake in JD.com sent shares of the Chinese online retailer sharply lower in Hong Kong, despite the company's recent upbeat earnings report.
Obama Back on the Frontlines: Endorsing Kamala Harris
Former US President Barack Obama returned to the national political stage on Tuesday evening to throw his support behind Kamala Harris in her tight presidential race against Republican Donald Trump. The move underscores the importance of the election and Obama's determination to ensure a Democratic victory.
Awaiting Data: The Importance of Fed Minutes
Investors are eagerly awaiting the release of Federal Reserve minutes and revisions to US labor market data on Wednesday. According to Goldman Sachs, the number of revised payrolls could fall by 600,000 to 1 million, which could create a false impression of weakness in the labor market. This data will be key to further analysis of the economic situation in the country.
Labor market under close scrutiny
Of particular importance is the upcoming US labor report, which will be released on September 6. It will be closely watched, since the situation in the labor market is now the main focus of economic policy, against the backdrop of falling inflation. It is this report that will be decisive in determining the further actions of the Fed and their impact on financial markets.
Rate markets are pricing in a decline: the dollar is under pressure
Interest rate futures are fully priced in the Fed's 25 basis point rate cut in September, with about a 30% chance of a deeper cut of 50 basis points. These expectations are putting pressure on the dollar, which is showing weakness in almost all areas.
Gold and the Euro: New Horizons
Gold continues to set records, surpassing $2,500 an ounce, reflecting its status as a safe haven in uncertain times. Meanwhile, the euro has reached $1.11, unfamiliar territory for the currency and a sign of new trends in the currency markets.
Risks on the Horizon: The Importance of Powell's Speech
However, not all analysts share the market's optimism. There is a risk that the labor market data could be stronger than expected, or that Fed Chairman Jerome Powell, speaking in Jackson Hole on Friday, will not show enough flexibility in his rhetoric. These factors could significantly change the mood in financial markets and force investors to revise their expectations.
Fear and Greed Index: From Panic to Stability
The CNN Fear and Greed Index, which measures sentiment in the stock, options and credit markets, has risen from extreme anxiety to neutral in a short period of time. This recovery suggests that investors are slowly starting to calm down after the recent turmoil.
Investors on Hold: Confirmation of the Favorable Outlook
Despite the improved sentiment, market participants remain cautious and await new economic data that may confirm or refute current forecasts. Investors are seeking clarity before diving back into risky assets, preferring to first make sure that positive trends are sustainable.
This period of waiting and analysis highlights not only the importance of data, but also the instability that still hangs over the markets, requiring caution and sober calculations from financial players.
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