Morning Bid: Markets hit tentative pause on selloff By Reuters
September 9, 2024 – Global markets are bracing for a major selloff on Monday after a sharp slump in Wall Street on Friday. Investors worldwide are reacting to troubling U.S. jobs data and comments from top Federal Reserve officials that have sparked a wave of pessimism. The S&P 500 and Dow Jones both recorded their biggest weekly drops since March, while the Nasdaq suffered its most significant loss since January 2022.
The immediate cause of concern was a ‘worst of both worlds’ scenario emerging from the latest U.S. economic data. Job market figures showed signs of weakness, with unemployment rates dipping slightly, but wage growth remained elevated. Meanwhile, the Federal Reserve indicated no plans to cut interest rates by the hoped-for 50 basis points, further unsettling investors. These developments have left markets unsure about the future direction of monetary policy, fueling anxiety.
Asian markets are expected to feel the brunt of this selloff. Japanese stock futures point to the Nikkei 225 index falling by over 3%, dragged down by a combination of a stronger yen and the risk aversion sweeping across global markets. On top of this, significant economic reports from Japan, China, and Taiwan are scheduled for release on Monday. Any negative surprises in these reports could further intensify market losses.
Chinese markets are particularly vulnerable. Stocks in China already closed at a seven-month low last Friday, and the outlook for Monday is bleak. Data from August is expected to show modest progress in consumer inflation, with a projected rise to 0.7%, up from 0.5% in July. However, factory gate prices are forecasted to drop by 1.4% year-on-year, almost double July’s decline, signaling that deflationary pressures persist in the Chinese economy. This continued weakness has led some, including former central bank governor Yi Gang, to call for more aggressive fiscal and monetary measures to combat deflation.
The situation is not much better in Japan, where the release of revised GDP figures, bank lending data, and trade statistics is likely to underscore the fragility of the country’s economic recovery. Taiwan, another key player in the region, will unveil its trade data for August. The forecast points to a surge in export growth, primarily driven by semiconductor giant TSMC. While this could provide a glimmer of hope, it’s unlikely to offset the broader negative sentiment engulfing global markets.
Investor sentiment is increasingly cautious, particularly in Asia. Data from LSEG showed that foreign investors were net sellers of Asian stocks in August, reflecting growing concerns about the region’s economic outlook. JP Morgan’s decision to drop its buy recommendation on Chinese stocks has only added to this unease.
Oil and commodity prices have also been falling sharply, signaling a broader shift in investor behavior. As concerns about the global economic picture deepen, riskier assets like commodities are being sold off in favor of safer havens. The uncertainty surrounding U.S. monetary policy, combined with weak economic indicators from key Asian markets, is creating a volatile environment.
Market watchers will be closely analyzing Monday’s economic data for any clues on the future direction of the global economy. For now, investors seem to be bracing for further losses as uncertainty and fear dominate the financial landscape.
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