MSCI’s broadest index of Asia-Pacific shares outside Japan was down 0.48% on Tuesday, declining from the one-month high it hit in the previous session
Asian stocks dropped on Tuesday as investors pondered looming U.S. interest rate cuts and awaited earnings from AI company Nvidia, while rising tensions in the Middle East and supply concerns checked risk sentiment and lifted oil prices.
Gold prices were just short of a record high, while the dollar steadied and the yen stayed near its highest in three weeks as investors sought safety in safe haven amid geopolitical risks.
Also supporting crude prices was Libya’s announcement of the closure of all oil fields, which halted production and exports.
MSCI’s broadest index of Asia-Pacific shares outside Japan was down 0.48% on Tuesday, declining from the one-month high it hit in the previous session.
European bourses were due to open marginally up, with Eurostoxx 50 futures gaining 0.08%, German DAX futures 0.13% higher and FTSE futures up 0.35%. The London stock market will resume trade after a holiday on Monday.
China’s blue stock index CSI300 declined 0.61% while Hong Kong’s Hang Seng index was down 0.27%, dragged by lacklustre earnings from Temu-parent PDD Holdings due to lower consumer spending.
Also weighing on sentiment was the move by Canada to impose a 100% tariff on imports of Chinese EVs and a 25% tariff on imported steel and aluminium from China.
In an eagerly awaited speech, Fed Chair Jerome Powell on Friday endorsed an imminent start to interest rate cuts, putting the focus on the Fed’s September meeting.
The Powell speech gave everything a decent boost on Friday, according to Ben Bennett, Asia-Pacific investment strategist at Legal and General Investment Management.
But I think investors are now waiting for PCE on Friday as well as the preliminary European inflation figures at the end of the week, Bennett added.
Investor attention will be on the U.S. PCE price index due on Friday and then the August payrolls report next week.
Markets are fully priced for a 25 bp cut from the Fed next month, with 100 basis points of easing expected in the next three meetings of the year.
Mansoor Mohi-Uddin, chief economist at Bank of Singapore, said Powell did not clarify the size of the Fed’s upcoming rate cuts noting it will depend on incoming data, the evolving outlook, and the balance of risks.
We continue to see the Fed making two 25 bps rate cuts this year to the benefit of risk assets. We think a 50 bps reduction next month is only likely if the payrolls report shows another jump in unemployment, he added.
