Global equity markets displayed mixed signals as key Asian indices showed little change, with declines in mainland China and South Korea. In contrast, Tokyo and Sydney recorded modest gains, buoyed by a positive session in US equities, which was driven by renewed dip-buying. US futures edged lower, benchmark Treasury yields dipped slightly, and the dollar advanced for a third consecutive session.
Market fluctuations reflect a cautious investor sentiment as they navigate US recession concerns alongside hopes for a soft economic landing. Political uncertainties are expected to be heightened with former President Donald Trump scheduled to debate US Vice President Kamala Harris later today.
Charu Chanana, Head of FX Strategy at Saxo Markets, noted, “Markets are evaluating whether the Federal Reserve can still implement a significant rate cut next week, which is contributing to the US dollar’s recent gains. This week, the focus is shifting from economic indicators to US elections, further supporting the dollar.”
According to Goldman Sachs Group Inc.’s prime brokerage desk, global equities experienced net selling for the eighth consecutive week, with North America leading the trend. This pattern, which began in May, reflects a broad repositioning by funds to increase liquidity in anticipation of potential market disruptions related to the US presidential election.
Konstantinos Venetis from TS Lombard commented, “Economic slowdowns do not necessarily lead to recessions, nor do stock market corrections always signal bear markets. However, the rising uncertainty surrounding macroeconomic growth and political factors, particularly the US election, increases the burden of proof on market bulls in the near term.”
On Wednesday, a US government report is anticipated to show a 2.6% increase in the consumer price index for August, the smallest rise since 2021, based on Bloomberg’s median economist forecast. Federal Reserve officials are in a blackout period ahead of their meeting on September 17-18, providing little new guidance.
Chris Low of FHN Financial remarked, “Inflation data is crucial. Weaker numbers might lead the Fed to consider a 50 basis-point cut, while stronger figures could lock in a 25 basis-point adjustment.”
In Asia, China’s CSI 300 Index, a key equity benchmark, neared its lowest closing level since January 2019 amid growing concerns about economic weakness, pressuring policymakers for further support. Chinese biotech stocks, including Wuxi AppTec, declined following the US House’s passage of a bill to blacklist certain foreign firms.
Alibaba’s stock surged up to 5.2% in Hong Kong after joining the Stock Connect program, which facilitates mainland investor access to the tech giant. Conversely, a Bloomberg index of Chinese real estate stocks fell 5.3%, its largest intraday drop since May, following the removal of some property companies from the program. Chinese developer bonds, such as those from China Vanke Co., also experienced declines amid sluggish home sales data.
China’s August exports increased by 8.7% year-on-year, surpassing the 6.6% estimate, while imports of commodities remained robust as industries prepared for the peak consumption period beginning this fall. Overall imports grew by just 0.5%, leading to a trade surplus of $91 billion for the month.
Iron ore prices, which fell below $90 per ton for the first time since 2022, saw a 1.1% rebound. Industrial commodities continue to face pressure from weak Chinese demand and growing global growth concerns.
The S&P 500 rose 1.2% after experiencing its worst start to the month on record, with Nvidia Corp. and Tesla Inc. leading the gains among large-cap stocks.
Oil prices edged down following a one-day gain linked to a broader risk-on market sentiment. Gold retreated slightly after a minor advance, with traders awaiting US inflation data. Bitcoin fell below $57,000, while aluminum extended its rebound due to decreased Chinese inventories and an unexpected rise in overall exports from China.
