Asian markets were uneven Monday, with euphoria about an expected US interest rate decrease counterbalanced by concerns about the Chinese economy following the release of further poor data.
Following a great finish on Wall Street, when all three indices rose strongly, Asia failed to keep up.
Tokyo, Sydney, Singapore, Seoul, Mumbai, Manila, Wellington, and Jakarta all increased, while Hong Kong, Bangkok, and Taipei declined.
London, Paris, and Frankfurt all collapsed into the open.
Figures released on Friday revealed that the Federal Reserve’s preferred inflation barometer, the personal consumption expenditures index, declined in line with expectations in July, positioning the bank to soften monetary policy this month.
The focus is now on the highly anticipated release of the non-farm payrolls report, which will provide the most recent snapshot of the world’s largest economy.
While a drop has been factored in, the data may determine how large it will be, with analysts predicting that another huge miss to the negative might compel regulators to cut rates by 50 basis points rather than the projected 25.
A well-below-forecast number last month fueled worries of a recession and caused a selloff in shares, but figures since then have allayed those concerns.
“The spending data continues the run of indicators suggesting that fears that the rise in the unemployment rate signalled an imminent turn down in activity are misplaced,” said Taylor Nugent of National Australia Bank.
“However, inflation data remains permissive in case the Fed needs to respond more assertively in the labor market.
“That leaves the focus squarely on payrolls on Friday as the key indicator ahead of the September 18 (rate) decision.”
He stated that markets had priced in 100 basis points of cuts by the end of the year.
Investor sentiment was jolted by concerns about China’s economy after a report revealed that activity in the country’s manufacturing sector declined for the fourth consecutive month in August, more than expected.
The revelation comes as officials face pressure to unveil new stimulus measures, notably for the struggling real estate sector, with observers warning that the government’s 5% GDP growth target may be missed this year.
“The world’s second-largest economy is sputtering, with factory activity lagging, deflationary pressures mounting, and the call for stimulus growing louder,” said independent analyst Stephen Innes.
“The services sector tried to pick up the slack, but growth there is almost invisible… signalling an economy barely managing a pulse.”
Meanwhile, oil prices extended last week’s sharp decline, fueled by news that OPEC and other key producers will proceed with a planned rise in supply beginning next month.
That has helped to mitigate concerns about Middle Eastern tensions and Libyan supply interruptions.
– Key figures at 0710 GMT –
Tokyo – Nikkei 225: Up 0.1% at 38,700.87 (close).
Hong Kong – Hang Seng Index: Down 1.7% at 17,677.54.
Shanghai – Composite: DOWN 1.1 per cent at 2,811.03 (close)
London – FTSE 100: DOWN 0.1 per cent at 8,366.86
Dollar/yen: DOWN at 146.11 yen from 146.20 yen on Friday
Euro/dollar: UP at $1.1067 from $1.1050
Pound/dollar: UP at $1.3143 from $1.3130
Euro/pound: UP at 84.21 pence from 84.15 pence
West Texas Intermediate: DOWN 0.6 per cent at $73.10 per barrel
Brent North Sea Crude: DOWN 0.7 per cent at $78.37 per barrel
New York – Dow: UP 0.6 per cent at 41,563.08 (close)
