(Sept 10): Asian stocks are set for a muted open after the S&P 500 nudged higher to a record on hopes the Federal Reserve will cut interest rates to curb a jobs downturn, with focus now on inflation data later this week.
Equity futures signal a flat open in Sydney, Tokyo and Hong Kong. S&P 500 contracts edged higher after big tech lifted the index on Tuesday, even as most shares fell and Apple Inc. sank following its iPhone 17 launch. A slide in bonds halted a four-day rally. Oil extended gains early Wednesday after an Israeli attack in Qatar revived fears of an escalation of the Middle East conflict.
After fresh signs of a cooling labor market, investors are bracing for inflation reports in the coming days that will help shape next week’s Fed meeting and the path of rate cuts into 2025 — a key test for whether Wall Street can sustain this month’s rally.
With money markets almost fully projecting three Fed cuts this year, the bar is high for both the US producer and consumer price indexes. A worse-than-expected inflation increase would complicate policy decisions at a time when pressure is mounting to provide economic relief through lower rates, according to Stephen Kates at Bankrate.
“It is clear the economy is caught between a rock and a hard place – or more accurately, between a labor shock and a hot pace,” he said.
In Asia, traders will monitor the potential for joint action by the US and the European Union to pressure Russia into Ukraine talks. President Donald Trump said he’s prepared to join the bloc to impose sweeping new tariffs on China and India — key buyers of Russian oil — and also said he plans to discuss trade with Indian Prime Minister Narendra Modi “in the coming weeks.”
The yen was little changed early Wednesday, after paring gains following a Tuesday report that Bank of Japan officials may raise interest rates again this year, regardless of domestic political instability.
Fed Meeting
Back in the US, the most relevant question now becomes the extent to which the August inflation data will reshape the market’s expectations for the Fed’s decision next week, according to Ian Lyngen and Vail Hartman at BMO Capital Markets.
“The Fed is cutting 25 basis points — barring a far more dramatic downshift in the trajectory of realized inflation, in which case a half-point cut could be on the table,” they said. “We’re solidly in the quarter-point camp and view the August inflation update as more meaningful for the conversations about where the Fed cutting cycle ends, not how it begins.”
In the run-up to the inflation reports, government data showed US job growth was far less robust in the year through March than previously reported. The number of workers on payrolls will likely be revised down by a record 911,000, or 0.6%, according to the preliminary benchmark revision out Tuesday. The final figures are due early next year.
Jamie Dimon said the record revision to US payrolls data is further proof that the US economy is battling a slowdown.
“The economy is weakening,” the JPMorgan Chase & Co. chief executive officer said in an interview with CNBC Tuesday. “Whether that is on the way to recession or just weakening, I don’t know.”
uploaded by Isabelle Francis