Asian markets were mixed on Tuesday following a subdued session on Wall Street, where traders took a pause from a recent rally driven by expectations of a US interest rate cut. Meanwhile, oil prices retained gains from a surge triggered by escalating tensions in the Middle East.
A series of positive economic data and remarks from Federal Reserve officials in recent weeks had boosted equities throughout August, recovering from earlier turbulence fueled by recession fears. Federal Reserve Chair Jerome Powell, in a widely anticipated speech on Friday, signaled that it might be time to start lowering borrowing costs from their highest levels in two decades, given the cooling inflation and a softening labor market.
Market speculation now centers on the extent of the Fed’s rate cuts in the coming months. Powell’s comments were followed by statements from other Fed officials. San Francisco Fed President Mary Daly suggested it would be “hard to imagine” not cutting rates next month, while Richmond Fed Chief Thomas Barkin supported the idea of “dialing down” rate hikes.
Despite these developments, traders struggled to build on their recent gains. Market focus is now shifting to upcoming economic data and persistent geopolitical concerns.
OANDA’s Kelvin Wong noted, “Market participants are closely watching the US economy in light of the Fed’s rate cut cycle, considering whether the Fed might be behind the curve on rate adjustments and how this could impact risk assets. Any negative data on economic growth and employment could trigger another risk-off period.”
Key US economic indicators due this week include the Personal Consumption Expenditures (PCE) index, the Fed’s preferred inflation gauge, along with GDP, personal income, spending, and consumer sentiment reports. Next week will also see the release of the crucial non-farm payrolls report, which contributed to a market rout earlier this month.
Additionally, chip giant Nvidia is set to release its latest earnings report, which will be closely analyzed for insights into demand for artificial intelligence technologies following a surge in related sectors this year.
On Wall Street, the Dow Jones Industrial Average posted modest gains, while the S&P 500 and Nasdaq ended lower. In Asia, Hong Kong saw gains despite setbacks in the tech sector, particularly after Temu owner PDD reported disappointing revenues and a dim outlook, causing its New York-listed shares to plunge a record 28.5%.
In Hong Kong, rivals Alibaba and JD.com also experienced declines of around four percent. Other Asian markets, including Tokyo, Manila, Bangkok, and Mumbai, posted gains, whereas Shanghai, Seoul, Singapore, Sydney, Wellington, Jakarta, and Taipei saw declines.
European markets fared better, with London, Paris, and Frankfurt rising as traders returned from an extended weekend.
Crude oil prices eased slightly but retained most of Monday’s gains of at least three percent due to ongoing concerns over the Middle East crisis. Recent clashes between Lebanon’s Hezbollah and Israel have heightened fears of broader regional conflict, potentially involving Iran. Additionally, news from Libya about the closure of oil fields and suspension of production and exports added to market volatility.
Luca Santos of ACY Securities commented, “The combination of geopolitical tensions, fluctuating oil prices, and mixed economic data has created a complex and uncertain environment for global financial markets. While initial responses have been cautious, the evolving nature of these risks suggests that market conditions could shift rapidly.”
