Investors in Asian markets saw a mostly positive trend on Monday, as they attempted to move beyond the turbulence of the previous week driven by concerns of a US recession. This week, attention turned towards the upcoming release of crucial inflation and retail data.
Following a significant downturn spurred by a disappointing US jobs report, equities made a rebound over the ensuing days, finishing on a positive note by the end of Friday.
The market gains were supported by a report indicating fewer individuals claimed unemployment benefits than anticipated, alleviating worries about a contraction in the world’s largest economy.
All three major indexes in New York concluded the week on a high note.
In Monday’s Asian trading, Hong Kong, Sydney, Seoul, Mumbai, Taipei, and Wellington experienced gains, while Shanghai, Singapore, Jakarta, and Manila saw marginal declines.
Markets in London, Paris, and Frankfurt opened on a positive note.
Tokyo remained closed for a holiday.
The yen experienced a decline in value following volatile fluctuations last week, during which it surged to a six-month high against the dollar after the weak US jobs data sparked expectations of a Federal Reserve rate cut.
This occurred as the Bank of Japan raised its rates for the second time in 17 years and hinted at more hikes in the future.
Reassuring comments aimed at calming investors amidst market volatility last week helped stabilize confidence to a certain extent.
However, Luca Santos at ACY Securities cautioned, “The perceived stability might be fleeting. The broader market sentiment, influenced by expectations of substantial rate cuts, indicates underlying uncertainties.”
“Anticipations of a cumulative 100 basis point rate cut this year, followed by another 100 basis points in 2025, suggest a growing consensus that the Federal Reserve may need to adopt a more aggressive monetary policy stance to bolster economic growth,” he added.
Although some calm has returned to trading floors, analysts warned that traders remained on edge as they anxiously awaited the release of forthcoming economic indicators.
This week’s consumer price index and retail sales reports could potentially give the Federal Reserve more leeway to decrease interest rates.
Expectations are for the central bank to reduce borrowing costs by 25 basis points next month, with at least one more cut expected before January, following a series of data suggesting that price levels are under control.
Nevertheless, Federal Reserve officials offered differing perspectives on the future trajectory of rates.
While Governor Michelle Bowman expressed belief in a potential rebound in inflation and remained wary of premature reductions, Boston Fed chief Susan Collins stated that officials could contemplate initiating cuts soon if data continued to support contained price levels.
“The prospect of a dual blow – rising CPI alongside declining retail sales – could trigger a significant market upheaval,” cautioned Stephen Innes.
“Such a scenario might prompt investors to swiftly exit, akin to a ‘stagflation’ scenario,” he elaborated in his Dark Side Of The Boom bulletin.
“Additionally, following the recent scare from the subdued job growth, a spike in inflation alone could inflict substantial damage,” he further warned.
– Key figures around 0710 GMT –
Hong Kong – Hang Seng Index: UP 0.1 per cent at 17,105.07
Shanghai – Composite: DOWN 0.1 per cent at 2,858.20 (close)
London – FTSE 100: UP 0.3 per cent at 8,196.10
Tokyo – Nikkei 225: Closed for a holiday
Euro/dollar: UP at $1.0923 from $1.0921 on Friday
Pound/dollar: UP at $1.2770 from $1.2760
Dollar/yen: UP at 147.15 yen from 146.63 yen
Euro/pound: DOWN at 85.52 pence from 85.57 pence
West Texas Intermediate: UP 0.6 per cent at $77.29 per barrel
Brent North Sea Crude: UP 0.4 per cent at $79.96 per barrel
New York – Dow: UP 0.1 per cent at 39,497.54 (close)
AFP