Equity benchmarks in Japan gained more than 1% as local markets reopened after a holiday. Shares in South Korea advanced and Hong Kong futures pointed to an increase of at least 1%. US stock futures edged down after the S&P 500 closed 0.3% higher in the previous session, a whisker away from last week’s all-time high.
Speculation has surged that Beijing will ramp up efforts to revive growth after authorities announced that top financial regulators will hold a press conference Tuesday on support for economic development. China’s equity market is in need of support after benchmarks fell to more than a five-year low earlier this month. A slew of disappointing data in August raised concerns that President Xi Jinping’s government could miss its annual growth target of around 5%.
Back in the US, data released Monday showed business activity expanded at a slightly slower pace in early September, while expectations deteriorated and a gauge of prices received climbed to a six-month high, stoking confidence the world’s largest economy can nail a soft landing. Investors are now awaiting data on the Fed’s preferred price metric and US personal spending later this week.
“This is a somewhat inconclusive report, and therefore it shouldn’t alter Fed expectations dramatically,” according to Vital Knowledge’s Adam Crisafulli. “The flash PMIs do suggest the US economy is on reasonably sound footing, especially compared to Europe.”
BloombergThe yield on policy-sensitive two-year Treasuries fell one basis point to 3.58%, while longer dated Treasuries were little changed in Asian trading. US government bonds had been under pressure with the Treasury slated to auction $183 billion in front-end supply and up to $25 billion of new issuance in corporates expected this week.
Traders have been wagering on nearly three-quarters of a point of policy easing by year end, suggesting at least one more jumbo rate cut is in store. Wall Street and policymakers alike are awaiting the jobs data on Friday for more clues on the direction of the economy.
Chicago Fed President Austan Goolsbee said with inflation approaching the central bank’s target the focus should turn to the labor market and “that likely means many more rate cuts over the next year.”
Neel Kashkari at the Minneapolis Fed also pointed to weakness in the job market, saying he backs lowering interest rates by another half percentage point by year end. His counterpart at the Atlanta Fed, Raphael Bostic took a moderate stance. Starting the central bank’s cutting cycle with a large step would help bring interest rates closer to neutral levels, but officials should not commit to a cadence of outsize moves, according to Bostic.
In other key events for Asia, the Reserve Bank of Australia is expected to hold the cash rate at a 12-year high of 4.35% on Tuesday — and keep it there until at least February. The nation’s 10-year yield dipped in early trading.
Gold rose to fresh all-time high as traders digested data and remarks from policymakers. Oil edged higher in early trading Tuesday after Israel launched airstrikes on targets across southern Lebanon, killing nearly 500 people and fanning fears of all-out war.