Asian markets diverge as China woes offset US rate hopes

FILE – A custodian cleans up an electronic stock board showing Japan’s Nikkei index at a securities firm in Tokyo, on Aug. 26, 2024. (AP Photo/Eugene Hoshiko, File)

Hong Kong, China — Asian markets were mixed Monday, with optimism over an expected US interest rate cut offset by worries over the Chinese economy following the release of more disappointing data.

Figures on Friday showed the Federal Reserve’s favoured gauge of inflation — personal consumption expenditures index — fell in line with forecasts in July, setting the bank up to ease monetary policy this month.

Focus is now on the release of the closely watched non-farm payrolls report, which will provide the latest snapshot of the world’s top economy.

READ: Slower inflation gives PSEi room to rise

While a cut has been priced in, the data could determine how big it will be, with analysts saying another big miss to the downside could prompt officials to slash rates by 50 basis points, rather than the expected 25.

A well-below-forecast reading last month fanned fears of a recession and sparked a rout across equities, though figures since then have soothed those concerns.

“The spending data continues the run of indicators suggesting that fears the rise in the unemployment rate signalled an imminent turn down in activity are misplaced,” said Taylor Nugent at National Australia Bank.

“But inflation data remains permissive should the Fed need to respond more assertively on the labour market.

“That leaves the focus squarely on payrolls on Friday as the key indicator ahead of the September 18 (rate) decision.”

He said markets had priced in 100 basis points of cuts by the end of the year.

After a strong finish on Wall Street, where all three indexes ended sharply higher, Asia struggled to match up.

Tokyo, Singapore, Manila and Jakarta rose but Hong Kong, Shanghai, Sydney, Seoul, Taipei and Wellington all fell.

Investor sentiment was jolted by worries over China’s economy after a report showed activity in the country’s manufacturing sector contracted for a fourth consecutive month in August and more than expected.

The news comes as leaders face calls to unveil fresh stimulus measures, particularly for the troubled property industry, with observers warning the government’s 5 percent GDP growth target could be missed this year.

“The world’s second-largest economy is sputtering, with factory activity lagging, deflationary pressures mounting, and the call for stimulus growing louder,” said independent analyst Stephen Innes.

“The services sector tried to pick up the slack, but growth there is almost invisible… signalling an economy barely managing a pulse.”

Meanwhile, oil prices extended last week’s big losses sparked by reports that OPEC and other key producers will press ahead with a planned increase in output from next month.

That has helped offset worries about tensions in the Middle East and Libyan supply disruptions.

Key figures around 0230 GMT

Tokyo – Nikkei 225: UP 0.2 percent at 38,709.88 (break)

Hong Kong – Hang Seng Index: DOWN 1.7 percent at 17,687.10

Shanghai – Composite: DOWN 0.6 percent at 2,824.41

Dollar/yen: DOWN at 146.15 yen from 146.20 yen on Friday

Euro/dollar: DOWN at $1.1048 from $1.1050

Pound/dollar: DOWN at $1.3119 from $1.3130

Euro/pound: UP at 84.22 pence from 84.15 pence

West Texas Intermediate: DOWN 0.7 percent at $73.01 per barrel

Brent North Sea Crude: DOWN 0.7 percent at $78.38 per barrel

New York – Dow: UP 0.6 percent at 41,563.08 (close)

London – FTSE 100: FLAT at 8,376.63 (close)