(Bloomberg) — European and U.S. stock markets were poised for a modest recovery on Monday, after a sell-off sparked by cooling U.S. jobs data that also sent Asia’s benchmark stock index to a three-week low.
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Futures for the Standard & Poor’s 500 Index and the Euro Stoxx 50 Index both advanced after underlying indicators fell on Friday following weaker-than-expected US payroll data. The data left economists and traders at odds over how aggressively the Federal Reserve will cut rates.
Shares in Asia recovered from Friday’s global losses, with shares from Taiwan to Australia falling on fears that global growth is slowing. Japan’s Nikkei 225 Stock Average fell for a fifth day, while iron ore fell below $90 a tonne for the first time since 2022.
While a Fed cut in September is essentially a foregone conclusion, “the question of course is how many and how big the cuts will be later,” Louis Kuijs, chief Asia-Pacific economist at S&P Global in Hong Kong, said in an interview on Bloomberg Television “There are a lot of risks in the global economy,” which is important to the Fed, he said.
Although the Fed this month all but committed to cutting rates from a more than two-decade high, investors have been scrutinizing economic data for clues about the scope and pace of the cuts. Compounding the headwinds is a rout in the technology sector.
The MSCI Asia Pacific Index fell as much as 1.8% on Monday, with chipmakers Taiwan Semiconductor Manufacturing Co. and Samsung Electronics Co. were among the biggest blows. Japan’s Nikkei 225 Stock Average fell more than 3% before paring losses. Taiwan’s main stock index fell 2%, while Hong Kong’s benchmarks were set for a fifth day of declines.
September is proving to be a volatile month for the markets, with both stocks and commodities falling on concerns about slowing global growth. Wall Street’s fear gauge – the Cboe Volatility Index – closed at its highest level in a month on Friday after US non-farm labor costs rose less than forecast.
Treasurys, yen
Government bonds and the yen – both popular havens – pared some of Friday’s gains. The US two-year yield rose four basis points to 3.69%, after falling 10 basis points on Friday. The yen fell 0.5% to 142.99 per dollar, after strengthening 0.8% on Friday.
China’s CSI 300 Index fell as much as 1.2%, dropping from this year’s high in May to more than 13%. A further decline would take the benchmark to levels not seen since early 2019, suggesting that years of policy efforts to revive the economy and support stock prices have proven futile.
Former People’s Bank of China Governor Yi Gang said his country must focus on ending deflation, in a rare admission by a prominent figure in China that falling prices threaten the country’s growth prospects.
Iron ore fell below the $90 per tonne threshold as a drop in demand from its biggest buyer China leads to losses. Futures have fallen by more than a third this year as pressure has increased in a sign of steel. Oil rose from its lowest level since 2021.
Traders will be keeping a close eye on US inflation data this week as concerns mount that the Fed waited too long to cut rates as recession risks rise. Treasury Secretary Janet Yellen tried to calm fears this weekend and saw no “red lights flashing” for the financial system. Fed Governor Christopher Waller said he was “open-minded” about the potential for a bigger rate cut.
“The August US nonfarm payrolls report came in softer than we expected, but not enough to change our basic view of the Fed – especially as recent spending and income data point to continued momentum in the economy,” says Seth Carpenter, chief economist at Morgan. Stanley, wrote in a note.
Some important events this week:
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Chinese trade, Tuesday
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The meeting of the standing committee of the Chinese National People’s Congress starts on Tuesday
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Germany CPI, Tuesday
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UK unemployment claims, unemployment, Tuesday
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Harris-Trump debate, Tuesday
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BOJ board member Nakagawa Junko speaks on Wednesday
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British industrial production, Wednesday
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US CPI, Wednesday
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Japanese PPI, Thursday
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BOJ board member Naoki Tamura speaks Thursday
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ECB interest rate decision in the eurozone on Thursday
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US initial unemployment claims, PPI, Thursday
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Industrial production in the eurozone, Friday
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France CPI, Friday
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ECB Governing Council member Olli Rehn will speak on Friday
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Consumer Confidence at the American University of Michigan, Friday
Some of the major moves in the markets:
Stocks
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S&P 500 futures rose 0.5% as of 1:52 p.m. Tokyo time
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Nikkei 225 futures (OSE) fell 0.4%
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Japan’s Topix fell 0.6%
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Australia’s S&P/ASX 200 fell 0.3%
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Hong Kong’s Hang Seng fell 2%
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The Shanghai Composite fell 0.9%
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Euro Stoxx 50 futures rose 0.5%
Currencies
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The Bloomberg Dollar Spot Index rose 0.1%
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The euro was little changed at $1.1076
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The Japanese yen fell 0.6% to 143.09 per dollar
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The offshore yuan fell 0.3% to 7.1147 per dollar
Cryptocurrencies
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Bitcoin rose 0.9% to $54,884.57
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Ether rose 0.9% to $2,298.16
Bonds
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The yield on ten-year government bonds rose by four basis points to 3.74%
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The Japanese ten-year yield rose by 4.5 basis points to 0.885%
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The Australian ten-year yield rose by seven basis points to 3.95%
Raw materials
This story was produced with the help of Bloomberg Automation.
–With help from Georgina McKay.
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