Asian markets halted their three-day rally, mirroring Wall Street’s pause as investors grew cautious.
Attention now shifts to upcoming U.S. payroll data and Federal Reserve minutes.
The spotlight remains on whether the Fed will hint at interest rate cuts, with traders eagerly awaiting clarity.
Chinese tech stocks bore the brunt of the downturn, particularly in Hong Kong, where they fell by up to 2%.
Concerns over China’s economic health, coupled with Walmart Inc.’s decision to offload its stake in JD.com Inc. and disappointing earnings from heavyweights like Kuaishou Technology, fueled the sector’s slide.
Despite this, futures for U.S. and European shares edged higher, suggesting a glimmer of optimism elsewhere.
After three days of weakening, the dollar found its footing again, with the Bloomberg Dollar Spot Index inching up.
All eyes are on Fed Chair Jerome Powell’s upcoming speech at Jackson Hole, with market participants on edge for hints on the trajectory of interest rates.
The Thai baht also made waves, reaching its highest level since July 2023, as investors anticipated the country’s central bank decision.
Homin Lee, senior macro strategist at Banque Lombard Odier & Cie SA in Singapore, observed that the cautious moves in Asia today reflect a broader wait-and-see approach ahead of Powell’s Jackson Hole address and key U.S. labor data.
He added that while these developments are crucial, they’re unlikely to be game-changers for the region’s markets in the long run.
Japan’s market also saw a dip, shrugging off positive export data as the yen’s rise fueled concerns over corporate earnings.
The yen steadied around 145 to the dollar after rallying the previous day.
Across the region, central banks in Indonesia and Thailand are expected to hold rates steady, balancing political uncertainties with the impending Fed policy shift.
Meanwhile, Australian 10-year bond yields dropped by six basis points during morning trade.
The recent rally in global markets was partly driven by bets that the Fed might soon signal rate cuts, spurring bond traders to take on record levels of risk in anticipation of a rally in the Treasury market.
On Wall Street, the S&P 500 slipped below 5,600 on Tuesday, led by losses in Nvidia Corp., which had previously surged nearly 25% in just six days.
U.S. Treasury 10-year yields remained relatively stable, while Brent crude continued its three-day decline, influenced by hopes for a cease-fire in Gaza and concerns over global demand.
Meanwhile, gold prices set a new record high.
Dan Wantrobski, a strategist at Janney Montgomery Scott, remained cautiously optimistic about the stock market’s near-term prospects but issued a stark warning.
He noted that the market is entering a period where the likelihood of a liquidity event is high, with trader positioning and sentiment quite vulnerable.
He added that they might be staring at a ‘bull trap,’ but hoped they were wrong.
As markets teeter on the edge of uncertainty, the business community watches closely, balancing hope with caution.
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