Thursday, September 5, 2024 — Stock markets in Asia experienced a mixed session as previous gains diminished, and the yen reversed earlier advances.
The MSCI Asia-Pacific Index, which had risen by 0.8%, pared most of its gains. Japan’s Nikkei 225 fell more than 1%, while major indices in Hong Kong and South Korea also turned lower. Conversely, Taiwan’s Taiex index surged over 1%, driven by a rebound in chipmaker shares.
Treasury yields increased following a drop of eight basis points in the previous session. This rise came as speculation intensified regarding significant rate cuts by the Federal Reserve, fueled by recent signals of a slowdown in the U.S. labor market. The dollar index, having weakened by 0.3% on Wednesday, steadied, while the yen, which had gained from rising Japanese real wages, erased its earlier gains.
Market participants are adopting a wait-and-see approach ahead of Friday’s U.S. payrolls report, a critical indicator before the Federal Reserve’s upcoming decision. Recent U.S. economic data has led to notable market reactions as concerns about a potential recession grow. Additionally, skepticism surrounding the artificial intelligence sector has impacted risk assets, with Nvidia Corp. experiencing its worst two-day decline since October 2022.
Carol Kong, a currency strategist at Commonwealth Bank of Australia, commented: “Financial markets are cautious as they await the U.S. payrolls report, which could influence the likelihood of a 50 basis point rate cut by the Fed. The USD/JPY pair is particularly susceptible to downside risks if the U.S. labor market shows signs of deterioration, given the differing monetary policies of the Fed and the Bank of Japan.”
In pre-market trading, U.S. futures declined slightly following a 0.2% drop in both the S&P 500 and Nasdaq 100 on Wednesday.
Shares of Nippon Steel Corp. ended a three-day losing streak, drawing attention after reports that U.S. President Joe Biden might block its $14.1 billion acquisition of United States Steel Corp. US Steel’s shares closed 17% lower in New York, marking the largest drop since April 2017.
Sentiment remains subdued regarding Chinese equities. JPMorgan Chase & Co. downgraded its recommendation for Chinese stocks, citing weak policy support and potential volatility related to the upcoming U.S. presidential election. A gauge of Chinese shares in Hong Kong fell to its lowest level in two weeks.
Hebe Chen, an analyst at IG Markets Ltd., noted: “Asian markets are volatile today as investors weigh concerns about upcoming U.S. job data, which might signal hard-landing risks similar to those seen in early August, against a pessimistic outlook for the global tech sector, exacerbated by Nvidia’s selloff.”
As the Federal Reserve prepares to initiate rate cuts in the coming weeks, the monthly U.S. employment data set for Friday will be crucial in determining the scale of these reductions. Fed Chair Jerome Powell has indicated that the central bank is now more focused on labor market risks than inflation.
Eddy Loh, chief investment officer at Maybank Group Wealth Management, told Bloomberg Radio: “The direction of the jobs data will be pivotal. We do not rule out more aggressive Fed easing if the employment data deteriorates. However, a soft landing in the U.S. could support risk assets.”
In commodities, oil prices edged up after hitting their lowest level since June 2023, supported by an industry report indicating a significant draw in U.S. crude inventories. Gold traded around $2,495, finding support after recent U.S. job openings data.
