(Bloomberg) — Asian stocks fell on Monday as investors braced for a US policy pivot and as China’s efforts to support its ailing economy failed to take hold.
A gauge of the region’s shares nudged lower in their first day of trading in a typically volatile month for markets. Benchmarks in South Korea and Australia slipped, while equities in Japan advanced. US contracts were slightly down, as were those for Hong Kong. The S&P 500 closed 1% higher on Friday ahead of an MSCI index rebalancing and as data supported expectations of looming Federal Reserve rate cuts. Treasuries are shut in the region due to a US public holiday.
Traders will be focusing on manufacturing data for a number of Asian countries on Monday. Caixin China manufacturing PMI is due after the official gauge of factory activity contracted for a fourth straight month in August, the latest sign the country may struggle to meet this year’s economic growth target.
“Another underwhelming set of Chinese PMI figures will put under the spotlight the country’s economic recovery – if one can really call it a recovery,” said Kyle Rodda, a senior market analyst at Capital.Com Inc. “There are hopes that policymakers are becoming more pro-active in managing the housing crisis via, however big bazooka stimulus doesn’t appear to be loaded-up.”
China said on Friday it had stepped into its government-debt market to curb a relentless bond rally, though the move raises new questions about efforts to stimulate the world’s second-largest economy. Its residential slump also deepened last month, while New World Development Co., Hong Kong’s most indebted major property developer, said it expects to post its first annual loss in two decades.
Elsewhere in Asia, Japanese businesses boosted investment in the second quarter of the year, reaffirming signs of moderate domestic demand-led activity after growth rebounded in the period.
September Volatility
September is historically a volatile month for global markets. It’s been one of the worst months for stocks in the past four years, while the dollar typically outperforms, according to data compiled by Bloomberg. Wall Street’s fear gauge – the Cboe Volatility Index, or VIX – has risen each September the past three years, the data show.
This month may be no different with the crucial US jobs report later this week serving as a guide to how quick, or slow, the Fed will cut rates, and as the US election campaign gets into full swing. Options traders spent upwards of $9 million to protect against a surge in the VIX this month.
Meanwhile, data on Friday also showed the Fed’s preferred measure of underlying US inflation — the core personal consumption expenditures price index — rose at a mild pace.
Traders are pricing the Fed’s easing cycle will begin this month, with a roughly one-in-four chance of a 50 basis point cut, according to data compiled by Bloomberg. Cash Treasuries are closed globally Monday for the US Labor Day holiday. Australian bond yields rose in early trading.
“September seasonality has a checkered record with risk off not uncommon and in election years more dramatic,” said Bob Savage, head of markets strategy and insights at BNY in New York. “The next week is the start of the end of the year. It has the makings for trouble given the economic data from the US and rest of the world now matters to how rate curves are played out and FX markets valued.”
In commodities markets, oil pushed lower on signs OPEC+ will progress with a plan to lift output from October, while the economic headwinds mount in China. Gold was little changed.
Key events this week:
- China Caixin manufacturing PMI, Monday
- Indonesia CPI, Monday
- India HSBC manufacturing PMI, Monday
- Eurozone HCOB manufacturing PMI, Monday
- UK S&P Global manufacturing PMI, Monday
- US markets closed for Labor Day holiday, Monday
- South Korea CPI, Tuesday
- Switzerland GDP, CPI, Tuesday
- South Africa GDP, Tuesday
- US construction spending, ISM Manufacturing index, Tuesday
- Mexico unemployment, Tuesday
- Brazil GDP, Tuesday
- Chile rate decision, Tuesday
- Australia GDP, Wednesday
- China Caixin services PMI, Wednesday
- Bloomberg CEO Forum in Jakarta, Wednesday
- Eurozone HCOB services PMI, PPI, Wednesday
- Poland rate decision, Wednesday
- Fed’s Beige Book, Wednesday
- Canada rate decision, Wednesday
- South Korea GDP, Thursday
- Malaysia rate decision, Thursday
- Philippines CPI, Thursday
- Taiwan CPI, Thursday
- Thailand CPI, Thursday
- Eurozone retail sales, Thursday
- Germany factory orders, Thursday
- US initial jobless claims, ADP employment, ISM services index, Thursday
- Eurozone GDP, Friday
- US nonfarm payrolls, Friday
- Canada unemployment, Friday
- Chile CPI, Friday
- Colombia CPI, Friday
Some of the main moves in markets:
Stocks
- S&P 500 futures fell 0.1% as of 9:25 a.m. Tokyo time
- Hang Seng futures fell 0.9%
- Japan’s Topix rose 0.5%
- Australia’s S&P/ASX 200 fell 0.4%
- Euro Stoxx 50 futures were little changed
Currencies
- The Bloomberg Dollar Spot Index was little changed
- The euro was little changed at $1.1050
- The Japanese yen fell 0.1% to 146.35 per dollar
- The offshore yuan was little changed at 7.0962 per dollar
- The Australian dollar rose 0.1% to $0.6774
Cryptocurrencies
- Bitcoin fell 1.7% to $57,445.26
- Ether fell 2.7% to $2,433.56
Bonds
- Australia’s 10-year yield advanced five basis points to 4.01%
Commodities
- West Texas Intermediate crude fell 0.5% to $73.16 a barrel
- Spot gold was little changed
This story was produced with the assistance of Bloomberg Automation.
–With assistance from Winnie Hsu and Joanna Ossinger.
More stories like this are available on bloomberg.com
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