Today’s News
As the new trading week begins in Asia, investors are buoyed by renewed optimism, driven by the possibility of a U.S. “soft landing” scenario, which bodes well for Asian and emerging markets.
Image Source: Reuters
Last week saw emerging market equities achieve their best performance since April, with global stocks experiencing their strongest week since October. The Nasdaq and S&P also marked their best weeks since October, and Wall Street’s VIX “fear index” dropped below 15.0.
Even Chinese stocks, after a three-week losing streak, managed a modest rebound from a six-month low. However, China’s economic indicators remain weak, consistently falling short of already lowered expectations. The country’s economic surprises index reached its lowest level in nearly a year last week.
In the U.S., while recent data and expectations have declined, there are signs of stabilization. Investors are pulling back on expectations of a significant rate cut by the Federal Reserve next month. The likelihood of a 50-basis point cut has decreased to around 25%, as the earlier market turmoil has subsided. Should recession fears diminish, riskier assets like stocks and emerging markets stand to gain.
The Dow posted a modest 0.25% gain. The strong recovery in U.S. megacap stocks could also boost Asian assets tied to U.S. Big Tech, such as Taiwan’s TSMC and the Hang Seng tech index, with Nvidia shares up 37% since their August 5 low.
Monday’s Asian economic and policy calendar is relatively light, with key data releases including Japanese machinery orders, Malaysian trade figures, and Thailand’s Q2 GDP.
Notably, recent data from the U.S. Commodity Futures Trading Commission revealed that currency speculators are now “long” on the Japanese yen for the first time since March 2021. Since early July, when the dollar reached a 38-year high of around 162.00 yen, speculators have covered one of their largest short yen positions on record, leading to a roughly 10% rally in the yen.
These significant moves were triggered by Tokyo’s intervention, an interest rate hike, and the Bank of Japan’s hawkish stance, coupled with a wave of safe-haven buying and carry trade unwinding following the global volatility shock earlier this month. However, last week’s “risk on” sentiment put a brake on these trends, with the dollar/yen rising 0.7%, its biggest increase since June.
Looking ahead, key developments that could influence Asian markets on Monday include Japanese machinery orders for June, Malaysian trade data for July, and Thailand’s Q2 GDP figures.
Other News
Westpac Q3 Profit Surges Amid Strong Cost Management
Westpac Banking Corp reported a market-beating third-quarter profit of AUD 1.8 billion (USD 1.2 billion), driven by improved net interest margins and effective cost control.
Aussie Earnings Season Surprises, But Caution Urged
Australian earnings have outperformed so far, with strong margins and investor optimism leading the way, but Macquarie analysts advise caution as the season progresses.
RBC Countersues Former CFO Ahn Over Code Breach
Royal Bank of Canada countersued former CFO Nadine Ahn, alleging she breached the bank’s code of conduct by favoring a subordinate with whom she had a secret relationship.
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