Global equities see cautious trade before Fed, BOJ events

Tokyo, Aug. 22, 2024 – European stocks were set for a breather as sentiment cools ahead of key events from the Federal Reserve and the Bank of Japan. Euro Stoxx 50 futures were little changed along with contracts for US equities. The MSCI Asia Pacific Index pared a 0.4% advance as benchmarks in Japan and Hong Kong came off session highs. That comes after the S&P 500 and Nasdaq 100 indexes posted modest gains on further signs the Fed will cut interest rates. The muted moves point to a degree …

August 22, 2024 2 min read

Tokyo, Aug. 22, 2024 – European stocks were set for a breather as sentiment cools ahead of key events from the Federal Reserve and the Bank of Japan.

Euro Stoxx 50 futures were little changed along with contracts for US equities.

The MSCI Asia Pacific Index pared a 0.4% advance as benchmarks in Japan and Hong Kong came off session highs.

That comes after the S&P 500 and Nasdaq 100 indexes posted modest gains on further signs the Fed will cut interest rates.

The muted moves point to a degree of caution ahead of Chair Jerome Powell’s speech Friday at the Jackson Hole economic symposium.

US rate-cut wagers had built up in recent sessions, with the latest dovish signal coming from Fed minutes that showed several officials acknowledged a plausible case for cutting rates.

Heading into the Jackson Hole event, “risk-taking may be capped for fears of any disappointment from the Fed chair,” said Jun Rong Yeap, a market strategist at IG Asia Pte. “Markets are in this waiting phase, with the US dollar seeking to stabilize from a recent selloff.”

A Bloomberg gauge of dollar’s strength inched higher after a recent bout of weakness. MSCI’s EM currency index fell for the second day, while the yen fluctuated after four straight sessions of gains.

BOJ Governor Kazuo Ueda will face intense market scrutiny on Friday when he speaks to lawmakers, after the central bank’s hawkish signals contributed to the global market turmoil earlier this month.

US government debt was little changed in Asian trading after gains for short-dated Treasuries in the prior session sent two-year yields falling almost 10 basis points before paring the move. T

Traders were once again pricing in more than 1 percentage point worth of Fed easing by the end of 2024, starting next month.

Elsewhere, Bank of Korea Governor Rhee Chang-yong said a few members were open to a rate cut in the next three months, after keeping borrowing costs steady.

Xiaomi Corp.’s shares rallied more than 8% following better-than-expected second-quarter results, supporting a gauge of Chinese tech stocks. That followed a slew of mixed earnings from heavyweights including Alibaba Group Holding Ltd.

“Confidence is not really coming back in great waves,” Herald van Der Linde, a strategist at HSBC Holdings Plc, told Bloomberg TV. “We need to see some confirmation that earnings are holding up. If that holds up, China can perform.”

A likely revision to US job growth added further evidence for traders to expect a September rate cut. The number of workers on payrolls will probably be revised down by 818,000 for the 12 months through March — or around 68,000 less each month — according to the Bureau of Labor Statistics’ preliminary benchmark revision. It was the largest downward revision since 2009.

In commodities, oil edged lower as concerns about a US slowdown outweighed the lift from falling inventories. Gold also saw selling after trading near a record high Wednesday on the expectations of a Fed rate cut. (Bloomberg)