(Bloomberg) — Asian stocks were poised for a steady open Tuesday, with investors holding their nerve as concerns mount over China’s economic woes.
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Futures show small gains for equity benchmarks in Tokyo and Hong Kong, while shares in Sydney look flat. US contracts edged lower ahead of Wall Street reopening later Tuesday, following the Labor Day public holiday.
Traders in Asia will be keeping a close eye on fresh signs of economic troubles in China. Data on Monday showed Chinese factory activity had contracted for a fourth straight month in August, the latest signal that the world’s second-largest economy may struggle to meet this year’s growth target.
The slowdown in China has highlighted the urgency of fresh government stimulus, while inventories of key raw materials from steel to soybeans are piling up in the nation’s warehouses — evidence that economic activity remains too feeble to clear surpluses.
While traders globally will approach this month with caution, as data shows September has been a poor month for stocks in recent years, the upcoming US jobs report on Friday could be a factor on whether history repeats itself. It will provide crucial insights into how quickly or slowly the Federal Reserve might cut rates and as the US election campaign gets into full swing.
Traders are pricing the US 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. The equity market rally could stall even if the Fed initiates a rate cut, JPMorgan Chase & Co. strategists cautioned, as any policy easing would be in response to slowing growth, while the seasonal trend for September would be another impediment, the team led by Mislav Matejka wrote in a note.
“We are not out of the woods yet,” Matejka said, reiterating his preference for defensive sectors against the backdrop of a pullback in bond yields. “Sentiment and positioning indicators look far from attractive, political and geopolitical uncertainty is elevated, and seasonals are more challenging.”
Jobs data potentially pointing to a very gradual cooling down of the US labor market could lead traders to adjust their expectations for rate cuts to the benefit of the dollar, according to to Valentin Marinov, head of G-10 FX strategy at Credit Agricole CIB.
“The markets may be leaning too dovish into the September Fed meeting,” Marinov told Bloomberg Television. “The dollar could recoup some ground once the markets realized that the Fed will move more cautiously.”
In commodities, oil edged higher after Libya declared force majeure at a key oilfield amid widening shutdowns that have wiped out close to a million barrels from daily global supplies.
Key events this week:
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 8:31 a.m. Tokyo time
Hang Seng futures rose 0.1%
S&P/ASX 200 futures were little changed
Nikkei 225 futures rose 0.2%
Currencies
The Bloomberg Dollar Spot Index was little changed
The euro was little changed at $1.1065
The Japanese yen was little changed at 146.91 per dollar
The offshore yuan was little changed at 7.1145 per dollar
Cryptocurrencies
Bitcoin rose 0.4% to $59,257.26
Ether fell 0.5% to $2,543.17
Bonds
Commodities
This story was produced with the assistance of Bloomberg Automation.
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