[Source – finance.yahoo]
Asian and Global Markets Slide
Asian stocks fell sharply at the start of September, marking a challenging beginning to a traditionally volatile month. Hong Kong’s Hang Seng Index saw a significant drop, influenced by a dramatic 14% fall in shares of New World Development Co. This decline followed the company’s announcement of its first annual loss in two decades, driven by ongoing issues in China’s property market. Globally, stock indices also showed weakness, with European and US futures reflecting a similar downturn.
Currency Movements and Economic Indicators
In currency markets, the Bloomberg Dollar Spot Index remained stable, while purchasing managers’ surveys from Taiwan, Thailand, and Indonesia revealed declines, exerting pressure on their respective currencies. The US dollar showed little movement, and US Treasury markets were closed due to the Labor Day holiday. The upcoming US jobs report is anticipated to influence Federal Reserve policies, with traders expecting potential interest rate cuts later this month.
China’s Economic Struggles Persist
China’s economic recovery remains elusive despite several rounds of stimulus. Recent data showed a continued slump in the property sector and mixed signals from manufacturing indicators. The Caixin China manufacturing index reported an unexpected uptick, but it fell short of reversing a fourth consecutive month of contraction in official factory activity gauges. Home sales continue to decline, highlighted by China Vanke Co.’s report of a half-year loss, marking its first in over 20 years.
Carlos Casanova, senior Asia economist at Union Bancaire Privee, expressed concerns about China’s economic struggle, noting that while efforts to bolster domestic demand might improve conditions in the fourth quarter, the lack of substantial policy space limits the effectiveness of large-scale support measures.
Trade Tensions with Japan
In a new development, China has threatened severe economic retaliation against Japan if Tokyo imposes further restrictions on chipmaking equipment sales to Chinese firms. This escalation adds to the existing trade and technology frictions between the two nations.
Volatility Expected in September
Historically, September is a volatile month for global markets, with past data showing poor performance for stocks and stronger dollar movements. The Cboe Volatility Index (VIX), a measure of market fear, has risen in each of the past three Septembers. This year, traders are closely watching the US jobs report and upcoming Federal Reserve meetings, which could signal the start of an easing cycle. Expectations include a potential 25 to 50 basis point rate cut.
European and Global Economic Outlook
In Europe, the European Central Bank may follow suit with interest rate cuts, supported by recent inflation data. Meanwhile, political shifts in Germany, where the far-right party made notable gains in regional elections, could impact the broader political landscape. However, the far-right is unlikely to form a government due to its isolation from other parties.
Commodities and Market Moves
Commodity markets also reflected the broader economic uncertainties. Oil prices fell as OPEC+ indicated a plan to increase output from October, while gold prices dropped. In the bond markets, yields on Japanese and Australian government bonds increased slightly.
Upcoming Key Events
Investors should keep an eye on several key economic indicators and events this week, including:
- Monday: HSBC manufacturing PMI (India), Eurozone HCOB manufacturing PMI, UK S&P Global manufacturing PMI
- Tuesday: South Korea CPI, Switzerland GDP & CPI, South Africa GDP, US construction spending & ISM Manufacturing Index, Mexico unemployment, Brazil GDP, Chile rate decision
- Wednesday: Australia GDP, China Caixin services PMI, Bloomberg CEO Forum in Jakarta, Eurozone HCOB services PMI & PPI, Poland rate decision, Fed’s Beige Book, Canada rate decision
- Thursday: South Korea GDP, Malaysia rate decision, Philippines CPI, Taiwan CPI, Thailand CPI, Eurozone retail sales, Germany factory orders, US initial jobless claims & ADP employment, ISM services index
- Friday: Eurozone GDP, US nonfarm payrolls, Canada unemployment, Chile CPI, Colombia CPI
Market Summary
- Stocks: S&P 500 futures -0.1%, Nikkei 225 futures -0.2%, Hong Kong Hang Seng -1.8%, Shanghai Composite -0.7%
- Currencies: Bloomberg Dollar Spot Index stable, euro $1.1047, yen 146.14 per dollar, offshore yuan -0.2% to 7.1026 per dollar
- Cryptocurrencies: Bitcoin -1.4% to $57,619.71, Ether -2.3% to $2,445.27
- Bonds: Japan’s 10-year yield +1.5 bps to 0.905%, Australia’s 10-year yield +4 bps to 4.01%
- Commodities: WTI crude -0.6% to $73.10/barrel, spot gold -0.2% to $2,497.25/ounce
The global financial landscape remains unsettled, with key economic indicators and central bank actions set to shape market directions in the coming weeks.
