Asian shares are set to fall early on Monday, while U.S. stock futures were stable, amid growing concerns about the health of the Chinese economy.
Contracts in Australia, Hong Kong and mainland China are expected to fall early when they open on Monday, risking worsening moves in Asian markets where liquidity has been reduced with the Japanese market closed for a public holiday.The S&P 500 closed down 0.2% on Friday as quarterly options expired.
Youth unemployment has risen to its highest level this year as the Chinese government cuts spending and domestic banks refrain from cutting lending rates, according to data released late Friday. Adding to the weak sentiment, the United States is reportedly planning rules as early as Monday to ban Chinese-made hardware and software for connected cars.
“The situation in China is only getting worse,” said Tony Sycamore, an analyst at IG in Sydney. “With Japan’s stock market closed for a public holiday, the People’s Bank of China disappointing markets on Friday and US yields rising, the overall mood in Asian stocks is likely to be more gloomy today.”
Markets are broadly bracing for the final quarter after the Federal Reserve kicked off a long-awaited interest-cutting cycle last week, boosting everything from Indonesian government bonds to gold. Data this week, including the Fed’s favorite inflation measure, will provide evidence on whether the rally will continue. Any worsening would increase the likelihood of another 50 basis points of rate cuts.
After fluctuating between gains and losses in the final minutes of trading on Friday, both the S&P 500 and Nasdaq 100 ended lower. The broader index had just hit its 39th record high of 2024. The blue-chip Dow Jones Industrial Average closed at a new record. More than 20 billion shares changed hands on U.S. exchanges, the busiest trading day since January 2021.
Intel was among the stocks that rose during the trading hours on reports of a takeover bid from Qualcomm, and its shares could continue to rise in U.S. trading after it was reported that Apollo Global Management is offering up to $5 billion in equity investment in the chipmaker.
Gold prices continued to rise on Friday, closing above $2,600 an ounce, following an Israeli military attack on the outskirts of Beirut. The precious metal and crude oil were stable in early trade as Hezbollah launched retaliatory attacks on a large swath of northern Israel after an explosion of pagers and other electronic devices killed at least 39 people in Lebanon last week.
The dollar was little changed against major currencies early on Monday. There was no spot trading of U.S. Treasuries in Asia due to a public holiday in Japan. Australian government bond futures were slightly lower ahead of the Reserve Bank of Australia extending its policy pause on Tuesday as house prices continue to weigh on inflation.
“The Australian economics team expects RBA commentary to be hawkish, but slightly less hawkish than in August, which should support a stronger AUD,” Commonwealth Bank of Australia strategists including Joseph Capurso wrote in a client note. “Significant conditions would need to be in place for the RBA to cut rates this year, with a risk of delaying it until early 2025.”
This week sees the release of factory activity and consumer confidence in Europe, inflation data in Australia and Tokyo, personal consumption expenditures, jobless claims and other economic data in the U.S., and a number of Federal Reserve speakers.
Some of the key market developments:
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