Photo credit: finance.yahoo.com
Asian Markets Decline Amid Geopolitical Tensions and Anticipation of Economic Data
SINGAPORE (Reuters) – Asian equity markets faced a downturn on Tuesday as investors navigated the potential for forthcoming U.S. interest rate cuts while closely monitoring the upcoming earnings report from Nvidia, a leading player in the artificial intelligence sector. This caution was compounded by rising tensions in the Middle East alongside fears surrounding supply disruptions, contributing to an uptick in oil prices.
In the commodities market, gold approached its all-time high while the U.S. dollar strengthened. Meanwhile, the Japanese yen stayed near a three-week peak as investors sought refuge amid escalating geopolitical risks, particularly following recent exchanges of fire between Israel and Hezbollah in Lebanon.
The situation in Libya also added upward pressure on crude prices after the government in the east announced a full shutdown of oil fields, halting all production and exports.
Market participants are particularly on edge as they await Nvidia’s earnings report scheduled for Wednesday. Analysts suggest that any outlook that does not meet high expectations could significantly impact investor sentiment in the AI-driven market surge.
On Tuesday, the MSCI index which tracks Asian-Pacific stocks outside Japan declined by 0.36%, pulling back from the one-month peak it reached earlier. Japan’s Nikkei index dipped 0.16%, while Chinese equities also faced declines.
China’s CSI 300 index fell by 0.28%, and Hong Kong’s Hang Seng index dropped 1% in early trading. These declines were largely influenced by disappointing earnings reports from PDD Holdings, which pointed to a slowdown in consumer spending.
Further dampening market sentiment was the announcement from Canada, which has chosen to impose import tariffs on Chinese electric vehicles and metal products, mirroring actions taken by the United States and European Union.
Powell Sets the Stage for Interest Rate Cuts
Federal Reserve Chair Jerome Powell’s recent remarks have intensified market speculation about the potential initiation of interest rate cuts. In a much-anticipated speech on Friday, Powell indicated that the Fed is poised to begin reducing rates, highlighting the significance of the upcoming meeting in September.
Gary Dugan, CEO of the Global CIO Office, remarked, “With the Fed now firmly in the driver’s seat, the markets will be on an intense data watch.” Investors are particularly focused on the U.S. personal consumption expenditure price index, which serves as the Fed’s preferred measure of inflation, set to be released on Friday, followed by the August payrolls report the following week.
Current market forecasts fully expect a 25-basis-point rate cut from the Fed next month, with a cumulative easing of 100 basis points anticipated over the next three meetings of the year.
Mansoor Mohi-Uddin, chief economist at Bank of Singapore, stated that while Powell’s comments were informative, they did not specify the magnitude of the forthcoming rate cuts. “It will depend on incoming data, the evolving outlook, and the balance of risks,” he noted. Mohi-Uddin added that he anticipates two 25 basis point cuts this year, benefiting risk assets, though a 50 basis point reduction next month would require a significant jump in unemployment based on the upcoming payrolls report.
As for currency movement, the yen declined slightly to 144.67 against the dollar, retreating from a previous three-week high of 143.45. The dollar index, measuring the currency against a basket of six others, was recorded at 100.84, still hovering near a 13-month low.
Oil prices saw a slight pullback following a 3% rise on Monday, driven by supply apprehensions amid mounting tensions in the Middle East and Libya’s production cuts. In early Tuesday trading, Brent crude futures were down 0.45% at $81.06 a barrel, while U.S. crude futures eased by 0.5% to $77.01 a barrel, both remaining close to their recent highs.
In the precious metals market, gold prices dipped to $2,511 per ounce but remained within striking distance of the record high of $2,531.60 reached on August 20.
Source
finance.yahoo.com