Pre-Fed Caution Leaves US Equity Markets Flat
On Monday, July 29, investors turned cautious as the Fed’s interest rate decision and press conference loomed.
US Market Overview
10-year US Treasury yields declined by 18 basis points to 4.176%, supporting bets on a September Fed rate cut. However, it was a mixed start to the week for the US equity markets. The Dow declined by 0.12%, while the Nasdaq Composite Index and the S&P 500 advanced by 0.07% and 0.08%, respectively.
Tesla Inc. (TSLA) rallied 5.60%, a highlight, as dip buyers returned after the earnings-induced sell-off.
US Manufacturing Data
Weaker-than-expected manufacturing sector data supported expectations of a more dovish Fed rate path. The Dallas Fed Manufacturing Index unexpectedly fell from -15.1 in June to -17.5 in July.
Expert Commentary
Arch Capital Global Chief Economist Parker Ross summed up the market sentiment in the lead-up to the Fed interest rate decision, stating,
Nikkei Price Forecast
Every new Nikkei analysis as it publishes, today's technical signal and key levels, live price — on one page.
See all Nikkei forecasts“On net, the market put more emphasis on the weaker data as market odds of a Sept rate cut increased to ~110% (i.e., a small chance of a 50bps cut) by market close on Friday, up from ~100% at the end of the prior week.”
A dovish Fed rate path could boost buyer demand for riskier assets. Lower borrowing costs may increase company profits.
The cautious overnight mood set the tone for the Tuesday Asian morning session. However, the Asian economic calendar also needed consideration.
Japan’s Economic Data
Japan’s unemployment rate unexpectedly fell from 2.6% in May to 2.5% in June. Tighter labor market conditions could support wage growth and increase disposable income. Higher disposable income may fuel consumer spending and demand-driven inflation. The Bank of Japan could consider the latest figures in its July monetary policy decision on Wednesday.
A more hawkish BoJ rate path and more aggressive cuts to Japanese Government Bond (JGB) purchases could boost Yen demand. A stronger Yen may impact overseas demand for Japanese goods, affecting buyer appetite for Nikkei Index-listed export stocks
Hang Seng and Mainland China Markets
Meanwhile, the Hang Seng Index slid by 1.26% on Tuesday morning. Real estate and tech stocks contributed to the losses.
The Hang Seng Tech (HSTECH) Index fell by 1.05% on Tuesday. Tencent (0700) declined by 1.68%, while Baidu (9888) advanced by 1.21%. Alibaba (9988) remained flat.
Falling house prices impacted the real-estate sector. The Hang Seng Mainland Properties Index (HSMPI) slid by 1.20%.
New home sales in China, across 30 large and medium-sized cities, were down 21.2% year-on-year over the last two weeks, according to CN Wire.
Mainland China equity markets continued to trend lower on China’s economic woes.
The Shanghai SE Composite Index and CSI 300 declined by 0.23% and 0.30%, respectively.
Nikkei Index Falls as Focus Turns to the BoJ
The Nikkei Index was down 0.49% on Tuesday morning. Uncertainty about the Bank of Japan’s monetary policy decision affected buyer demand for Nikkei-listed stocks.
Fast Retailing Co. Ltd. (9983) slid by 2.20%, while Softbank Group Corp. (9984) and Tokyo Electron Ltd. (8035) saw losses of 1.61% and 1.36%, respectively.
ASX 200 Sinks on Mining Sector Pullback
The ASX 200 Index declined by 0.85% on Tuesday morning. Losses were broad-based, as investors await Aussie inflation numbers that could fuel bets on a Q3 2024 RBA rate hike. Tech and mining stocks saw heavy losses. The S&P ASX All Technology Index (XTX) fell by 1.20%.
Mining giants BHP Group Ltd (BHP) and Rio Tinto Ltd. (RIO) were down by 1.16% and 1.21%, respectively. Investors reacted to the news of BHP and Lundin Mining planning to acquire Filo Corp. Fortescue Metals Group (FMG) tumbled 8.94% on reports of JPMorgan (JMP) looking to offload $1.9 billion worth of discounted stock for an institutional investor.
Investors should remain alert with US politics and private sector PMIs in focus. Closely monitor the news wires, real-time data, and expert commentary to manage trading strategies accordingly. Stay informed with our latest news and analysis to manage positions across the Asian equity markets.
