Stocks Drop as Jobs Data Adds to Case for Fed Cuts: Markets Wrap

(Bloomberg) — Asian stocks fell Monday after U.S. jobs data added to concerns that the Federal Reserve may have waited too long to cut interest rates.

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Stocks in Australia, Japan and South Korea posted losses in early trade, while U.S. futures were little changed. The dollar was steady against its peers, with traders divided over the extent of the Federal Reserve’s easing next week. Iron ore fell below $90 a tonne for the first time since late 2022.

Friday’s nonfarm payrolls data added to signs that the U.S. labor market is losing steam, fueling debate about how far the Federal Reserve should go in cutting interest rates. After the data was released, Fed Governor Christopher Waller said he was “open-minded” about the possibility of cutting rates further.

“Asian stock markets, especially in technology-driven regions such as Japan, Taiwan and South Korea, are set to brace for a storm as their economies are highly sensitive to the impending global slowdown,” said Hebei Chen, an analyst at IG Markets Ltd. “If the dark clouds of the faltering US economy spread globally, risk-sensitive currencies such as the Australian dollar could soon come under heavy pressure.”

Before Tokyo stocks opened on Monday, data showed Japan’s economy expanded in the second quarter at a slightly slower pace than the government initially estimated. But it was still ahead of schedule to keep the Bank of Japan on track to raise interest rates later this year. The yen was slightly lower against the U.S. dollar early Monday, while the Nikkei 225 index fell about 3 percent.

Chinese assets will be in focus as officials try to lift sentiment by removing foreign ownership limits in the manufacturing and health sectors. Shares of Seven & i Holdings Co. will be closely watched amid speculation of a takeover bid by Alimentation Couche-Tard Inc. The yield on the 10-year Australian Treasury note rose in early trade.

China’s central bank kept gold purchases unchanged for a fourth straight month in August, in another sign that prices near record highs are hampering global demand from central banks.

September has proven to be a volatile month for markets as global stocks and commodities tumbled amid concerns about weak global growth. The worries are likely to deepen with China’s inflation and producer price data due later Monday that could highlight the economic malaise that policymakers are struggling to address.

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Traders will be closely watching U.S. inflation data this week as concerns grow that the Federal Reserve has waited too long to cut interest rates as recession risks grow. Treasury Secretary Janet Yellen sought to calm concerns over the weekend, saying she saw no “red lights flashing” in the financial system and reiterated her view that the U.S. economy has reached a soft landing even as job growth has weakened.

Fed policymakers’ comments after the jobs data “did not signal an immediate sense of urgency in the need for a 50 basis point rate cut,” said Diana Mussina, deputy chief economist at AMB Ltd. in Sydney. “So a 25 basis point cut is more likely in September, with the risk of a further rate cut if the data suggests the need.”

In other commodities, oil prices rose early Monday after falling below $68 a barrel on Friday as concerns about weak demand for crude due to a U.S. jobs report deepened.

Some of the main events this week:

• China CPI, Monday

• Japan GDP, Monday

• Chile Copper Exports, Trade, Monday

• Mexico Consumer Price Index, Monday

• Consumer Confidence in Australia, Tuesday

• China Trade Tuesday

• The meetings of the Standing Committee of the National People’s Congress of China begin today, Tuesday.

• Germany CPI, Tuesday

• UK unemployment claims, unemployment, Tuesday

• South Africa Manufacturing Output, Tuesday

• Bank of Canada Governor Tiff Macklem speaks Tuesday

• Brazil CPI, Tuesday

• Harris-Trump debate, Tuesday

• Reserve Bank of Australia Assistant Governor Sarah Hunter speaks on Wednesday

• Bank of Japan Board Member Nakagawa Junko speaks on Wednesday

• South Korea’s unemployment rate, Wednesday

• UK Industrial Production, Wednesday

• US CPI, Wednesday

• Japan Producer Price Index, Thursday

• Bank of Japan Board Member Naoki Tamura speaks on Thursday

• India CPI, Industrial Production, Trade, Thursday

• European Central Bank decision on eurozone interest rates, Thursday

• Swiss National Bank President Thomas Jordan speaks Thursday

• Peru interest rate decision, Thursday

• US Initial Jobless Claims, Producer Price Index, Thursday

• New Zealand PMI, Friday

• Eurozone Industrial Production, Friday

• Consumer Price Index in France, Friday

• ECB Governing Council Member Olli Rehn speaks on Friday

• University of Michigan Consumer Survey, Friday

Some key movements in the markets:

Stocks

• S&P 500 futures were up 0.1% as of 9:24 a.m. in Tokyo.

• Hang Seng futures were little changed.

• Japan’s Topix index fell 2.6%.

• Australia’s S&P/ASX 200 index fell 1%.

• Euro Stoxx 50 futures fell 1.9%.

Currencies

• The Bloomberg Dollar Index was little changed.

• The euro was little changed at $1.1088.

• The Japanese yen fell 0.3% to 142.67 yen per dollar.

• The offshore yuan fell 0.1% to 7.1044 against the dollar.

• The Australian dollar was little changed at $0.6675.

Cryptocurrencies

• Bitcoin rose 1.4% to $55,123.01

• Ether rose 1.4% to $2,308.07

Bonds

Goods

This story was produced with the help of Bloomberg Automation.

–With the assistance of Georgina Mackay.

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