US and European markets are set for a modest bounce back after last week’s selloff, sparked by weaker-than-expected US jobs data.
Both the S&P 500 and Euro Stoxx 50 futures advanced, hinting at recovery after a sharp dip on Friday.
The dip left economists divided on the Federal Reserve’s next move, with some eyeing aggressive rate cuts.
Across Asia, markets followed suit, with stocks from Taiwan to Australia dropping amid fears of slowing global growth.
Japan’s Nikkei 225 took its fifth consecutive hit, while iron ore prices plunged below $90 a ton for the first time since 2022.
Louis Kuijs, chief Asia-Pacific economist at S&P Global, noted the challenge facing the Fed, saying that while a September cut seems likely, the key question remains the number and size of cuts in the future.
“There are lots of risks across the global economy,” he said, acknowledging how these uncertainties are impacting the Fed’s decision-making.
Although the Fed is expected to lower interest rates, investors are eagerly analyzing economic data for hints about the size and speed of future cuts.
The volatile tech sector isn’t making things easier—chipmakers like Taiwan Semiconductor and Samsung Electronics saw significant drops, contributing to a 1.8% fall in the MSCI Asia Pacific Index.
With September proving to be a turbulent month for global markets, stocks and commodities are feeling the heat.
Wall Street’s fear gauge, the Cboe Volatility Index, hit its highest level in a month, fueled by weaker US nonfarm payroll data.
Treasuries, Yen Dip After Haven Surge
Meanwhile, safe-haven assets like treasuries and the yen lost some of their shine.
The US two-year Treasury yield climbed to 3.69%, reversing part of Friday’s 10-point drop, while the yen slipped 0.5% against the dollar.
China’s CSI 300 also saw a decline, with the index now down over 13% since May.
Despite years of policy measures, China’s efforts to stimulate growth seem to be struggling.
Former People’s Bank of China Governor Yi Gang acknowledged that deflation remains a real concern, hinting at deeper challenges ahead for the world’s second-largest economy.
Iron ore, a key indicator of industrial activity, has sunk below the $90-a-ton mark as demand from China weakens.
Oil prices, however, found some relief, edging up from their lowest levels since 2021.
Looking ahead, traders will be keenly watching US inflation data this week. Concerns are rising that the Fed may have waited too long to act, allowing recession risks to build.
Yet, Treasury Secretary Janet Yellen has sought to ease fears, saying she sees no immediate signs of financial instability.
Fed Governor Christopher Waller added that he’s open-minded about the potential for larger rate cuts soon.
As Morgan Stanley’s chief global economist, Seth Carpenter, noted, “The August US nonfarm payrolls report came in softer than we expected, but not by enough to change our baseline view on the Fed—especially because recent spending and income data suggest continued momentum in the economy.”
Investors and business leaders are bracing for what’s next, with market sentiment hanging in the balance.
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