The latest US non-farm payroll data for August showed that the number of new jobs added was significantly lower than expected, further bolstering market expectations of a rate cut by the Federal Reserve (Fed). As a result, emerging markets and Asia-Pacific stock markets generally rose on Monday, September 8th, with the Nikkei 225 index surging nearly 2% at one point, approaching its historical high. Gold prices remained stable near historic highs, while US bond yields dropped to a five-month low.
S&P 500 futures were up 0.2% in the Asian session on Monday, recovering from the losses seen last Friday. On Friday, US stocks closed slightly lower, with the Dow Jones Industrial Average falling almost 0.5%, the S&P 500 index dropping 0.3%, and the Nasdaq closing nearly flat.
Revised second-quarter GDP data in Japan showed growth accelerating faster than initially estimated, driven mainly by exports and consumption. With this positive news, the Nikkei 225 index rose by 1.5%, and the TOPIX index increased by 1.1%. At one point, the Nikkei 225 index even climbed to 43,835 points, nearing the historical intraday high of 43,876 points set on August 19.
Meanwhile, the Japanese yen fell by 0.6% against the US dollar to 148.39, indicating reduced market concerns about further interest rate hikes by the Bank of Japan.
In addition, the Taiwan Weighted Index rose by 0.22% to 24,547.38 points. The South Korean KOSPI increased by about 0.46% to 3,219.74 points, India’s Nifty 50 rose by 0.31% to 24,818.55 points, and the Australian S&P/ASX 200 closed at 8,849.60 points, down 0.24%.
China’s Shanghai and Shenzhen 300 Index rose slightly by 0.16%, the Shanghai Composite Index increased by about 0.4%, and the Hang Seng Index in Hong Kong rose by around 0.8%. Official data showed a significant slowdown in China’s export growth in August, with imports also faltering, indicating weak external and domestic demand. However, the easing of housing purchase restrictions in Shenzhen following Beijing and Shanghai’s lead boosted the real estate sector. Additionally, Baidu’s plan to issue yuan-denominated unsecured notes to non-US persons through offshore transactions outside the US led to a roughly 10% increase in its stock price. Alibaba and Tencent also rallied, lifting the Hang Seng Index.
The MSCI Emerging Markets Index rose by 0.4%, extending gains of over 1% from the previous week.
Bloomberg’s Asia Developing Market Index also rose by 0.3%, while the index tracking emerging market currencies edged higher.
The US Dollar Index saw a slight rebound on Monday following a sharp decline last Friday due to the employment data.
Japanese Prime Minister Shiro Ishiba announced his resignation as leader of the Liberal Democratic Party on Sunday, taking responsibility for the coalition’s dismal performance in the upper house election. His resignation has triggered a leadership struggle in Japanese politics, with some market participants concerned that political uncertainty could weaken the continuity of economic policies.
Investors are focused on who will succeed as Prime Minister, and if senior Liberal Democratic Party member Sanae Takaichi and other doves take office, it may pose a challenge to the Bank of Japan’s rate hike policy.
In Europe, French Prime Minister Francois Bayrou is facing a confidence vote on Monday, which is expected to result in his defeat, potentially ushering in France’s fifth Prime Minister in three years.
This situation highlights the political instability in the Eurozone’s second-largest economy, further exacerbating market concerns.
Copper prices held steady on Monday, with the London Metal Exchange (LME) three-month copper trading at $9,908.50 per ton, up 0.1% and nearing a five-month high.
Aluminum prices rose by 0.2%, zinc prices increased by 0.4%, while iron ore hovered around $104.70 per ton.
Gold prices remained at $3,588 per ounce, nearing the $3,600 milestone, with a 37% year-to-date increase, following a 27% rise in 2024. Analysts point to demand for safe havens and expectations of Fed rate cuts as strong support for gold prices.
Oil prices also rose, with OPEC+ agreeing over the weekend to slow down production increases from October onwards to address expectations of global demand slowdown. Both Brent crude and US West Texas Intermediate (WTI) crude oil rose by over 1%.
Investors will closely watch US Producer Price Index (PPI) and Consumer Price Index (CPI) data this week, as these figures may further impact market expectations of the extent and timing of Fed rate cuts.
The CME FedWatch tool shows that the market currently sees a 90% chance of a 25 basis point rate cut by the Fed this month, with a 10% chance of a 50 basis point cut.
Analysts suggest that failure by the Fed to signal further rate cuts could put pressure on the stock market. George Boubouras, Research Director at K2 Asset Management, stated, “The Fed has sufficient reason to cut rates by 25 basis points…It is expected that there will be two more rate cuts within the next six months.”
He added, “US cash yields are significantly higher than in other developed markets…If the Fed does not signal more rate cuts, the stock market will be even weaker.”