Asian stocks displayed mixed results on Monday as investors closely watch the upcoming Federal Reserve meeting. This comes after Wall Street enjoyed its best week since November, with a slight increase in U.S. stocks on Friday.
U.S. futures saw an uptick while oil prices declined.
Japan’s benchmark index experienced a decline of 1.8%, closing at 37,388.62. This downturn followed the release of data indicating a year-on-year drop of 1.7% in core machinery orders for June, a key indicator of future capital spending.
The U.S. dollar fell 1.2% to 145.81 Japanese yen, down from 147.58 yen, amid rising expectations of a September rate cut by the Federal Reserve.
Last week, stronger-than-expected retail sales figures in the U.S. helped bolster market confidence and shifted expectations regarding potential interest rate cuts by the Federal Reserve in September. This shift may lead to a sell-off of the yen against the dollar and other major currencies, though the dollar-yen exchange rate has been trending downward in recent weeks.
Currency analysts indicate that the recent fluctuations in the foreign exchange market are influenced not only by actions from the Bank of Japan but also by signals from the Federal Reserve regarding possible rate adjustments, weak U.S. job market data, and broader global economic uncertainties.
Market attention is now focused on Jackson Hole, Wyoming, where Federal Reserve Chair Jerome Powell is scheduled to deliver a speech later this week. This venue has a history of significant policy announcements.
Economists note that Powell may face challenges in committing to a specific trajectory for future interest rates, given that the Fed’s decisions will largely depend on forthcoming data reports. However, it is anticipated that Powell might offer insights regarding the Fed’s intentions on easing constraints on the economy through rate cuts or stimulating growth.
In other Asian markets, Australia’s S&P/ASX 200 saw a slight increase of 0.1%, reaching 7,980.40, while Seoul’s Kospi index declined by 0.9% to 2,674.36. The Hang Seng index in Hong Kong rose by 1% to 17,599.76, and the Shanghai Composite gained 0.5%, closing at 2,893.33.
In Bangkok, the SET index increased by 1.1% following reports that the country’s GDP grew by 2.3% in the second quarter, primarily driven by tourism.
On Friday, the S&P 500 registered a 0.2% gain, settling at 5,554.25, marking its seventh consecutive gain and positioning itself within 2% of its all-time high achieved last month. The Dow Jones Industrial Average also rose by 0.2% to 40,659.76, while the Nasdaq composite added 0.2% to 17,631.72.
In the bond market, Treasury yields eased following mixed economic reports from the U.S. One report indicated that homebuilders initiated fewer projects than anticipated, dampening earlier optimism spurred by a series of positive data releases, including inflation and retail sales.
A subsequent report indicated that consumer sentiment in the U.S. has improved more than expected, a crucial development for Wall Street, as consumer spending constitutes a significant portion of the economy.
Despite growing confidence in the economy’s resilience, concerns remain about a potential slowdown amid high interest rates. The key question is whether the deceleration in growth might overshoot into a recession. Market hopes hinge on an anticipated interest rate cut at the Federal Reserve’s next meeting in September, which could help mitigate such risks.
In the bond market, the yield on the 10-year Treasury decreased to 3.88% from 3.92%, while the two-year yield, closely tied to expectations for Fed action, fell to 4.05% from 4.10%.
In energy markets, benchmark U.S. crude dropped 16 cents to $75.38 per barrel, while Brent crude, the international standard, decreased by 22 cents to $79.46 per barrel.
Additionally, the euro continued to strengthen against the U.S. dollar, rising to $1.1042 on Monday from $1.1028.
