Stocks Poised for Losses as Economic Fears Deepen: Markets Are Mixed

(Bloomberg) — Asian markets are braced for losses on Monday as fears of a deeper economic slowdown unnerve traders who are also bracing for more volatility due to rising tensions in the Middle East.

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U.S. futures fell in early trading amid fallout from heavy losses on Wall Street on Friday and Berkshire Hathaway Inc.’s weekend disclosure that it reduced its stake in Apple Inc. Contracts indicate that Australian, Japanese and Hong Kong stocks are expected to fall on Monday, while the dollar remained stable.

The Berkshire sale “will immediately be viewed as a negative,” said Mark Lehmann, CEO of Citizens JMP Securities. “Apple is the number one player in the global consumer space and that is the statement about the global consumer.”

Oil rose in early trading after Saudi Arabia raised the price of oil it sells to Asia and amid reports that Iran could attack Israel to avenge the killings of Hezbollah and Hamas officials. Shares in Saudi Arabia and Israel fell more than 2% on Sunday, surpassing Friday’s losses on Wall Street.

The worsening conflict in the Middle East risks adding more turmoil to markets as investors prepare for a turbulent second half of the year. A gauge of bond market volatility rose, while the VIX index – Wall Street’s gauge of fear – jumped to its highest level in almost 18 months, after a weak US jobs report raised fears of a recession , as focus increases on an already chaotic US election race.

“In the coming months, global and Australian equities look vulnerable to further declines, suggesting it is too early to buy the dip,” said Shane Oliver, chief economist and head of investment strategy at AMP Ltd. in Sydney. “A fix is ​​in progress.”

U.S. nonfarm payrolls rose by 114,000 in July — one of the weakest numbers since the pandemic — and job growth was revised lower in the previous two months. The unemployment rate unexpectedly rose for a fourth month to 4.3%, above the Federal Reserve’s year-end forecast, triggering a closely watched recession indicator.

The S&P 500 saw its worst reaction to employment data in nearly two years, falling 1.8% on Friday. Intel Corp. plunged 26% on a grim growth forecast, adding to a string of weak earnings in the technology sector that sent the Nasdaq 100 down more than 10% from its peak and into a correction.

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Meanwhile, US Treasuries rose on Friday, with policy-sensitive two-year yields falling to the lowest level since May 2023 as concerns grow over the Fed’s decision to hold rates. maximum of two decades, risking a deeper economic slowdown. Investors predict the Fed will cut rates by more than a percentage point in 2024, with a greater likelihood of an outsized 50 basis point cut in September, according to data compiled by Bloomberg.

“With the unemployment rate above and core PCE inflation now below the Fed’s year-end forecasts, we believe the balance of risks favors more aggressive action by the Fed,” said Brian Rose, senior U.S. economist. in the wealth management unit of UBS Group AG. . “We are changing our base case to rate cuts of 50 basis points in September and 25 basis points in November and December,” after previously only seeing half that amount by the end of the year, he wrote in a note to clients.

In Asia, traders will soon focus on Caixin China’s private services and composite activity data for further assessment of the health of the world’s second-largest economy, after the manufacturing PMI unexpectedly contracted for the first time in nine months. . The data was released at a time when Chinese authorities made it clear in July that there would be limited aid to stimulate domestic consumption.

Later this week, inflation data will be released in Thailand and Chile, while Mexico and Peru will make policy decisions as debate intensifies over the prospects for emerging market dollar and local currency bonds. The Australian Reserve Bank’s policy meeting will be analyzed to confirm easing bets until the end of the year, while US economic activity and credit data and speeches by regional Fed bank presidents will be closely watched.

“Improved data this week could provide some confidence in a bond market that is grossly overbought and offer reassurance to equity and credit,” Chris Weston, head of research at Pepperstone Group, wrote in a note to clients.

“On the other hand, if data continues to weaken and central banks fail to deliver on market pricing in their narrative, one thing seems clear: buying the dip in risk may not be as effective this time around, while short sellers will have a lot another thriving hunting ground,” he said.

Main events this week:

• Bank of Japan issues minutes of June meeting, Monday

• China Caixin Services PMI, Monday

• Indonesian GDP, Monday

• Retail sales in Singapore, Monday

• Thailand CPI, Monday

• Eurozone PPI, HCOB Services PMI, Monday

• US ISM Services Index, Monday

• Chicago Fed President Austan Goolsbee Speaks Monday

• San Francisco Fed President Mary Daly speaks on Monday

• Australia rate decision Tuesday

• Cash Earnings in Japan Tuesday

• Philippine CPI, trade, Tuesday

• Retail sales in the euro zone, Tuesday

• US trade, Tuesday

• Unemployment in New Zealand, Wednesday

• China trade, Wednesday

• Chile’s copper exports and trade, Wednesday

• Consumer credit in the US, Wednesday

• Elizabeth McCaul, member of the ECB Supervisory Board, speaks on Wednesday

• RBA Governor Michele Bullock speaks, Thursday

• Philippine GDP, Thursday

• India rate decision, Thursday

• Initial unemployment claims in the US, Thursday

• Richmond Fed President Thomas Barkin Speaks Thursday

• Chile’s IPC, Thursday

• Colombia IPC, Thursday

• Mexico CPI, Rate Decision Thursday

• Peru rate decision, Thursday

• China PPI, CPI, Friday

• German CPI, Friday

• Unemployment in Canada, Friday

• Brazil’s IPC, Friday

Some of the main movements in the markets:

Actions

• S&P 500 futures were down 0.8% at 8:20 a.m. Tokyo time

• Hang Seng futures fell 0.4%

• S&P/ASX 200 futures fell 1.5%

• Nikkei 225 futures fell 3.1%

Coins

• The Bloomberg Dollar Spot index was little changed

• The euro was little changed at $1.0906

• The Japanese yen rose 0.2% to 146.22 per dollar

• The offshore yuan was little changed at 7.1615 per dollar

• The Australian dollar was little changed at $0.6510

Cryptocurrencies

• Bitcoin fell 0.8% to $58,668.18

• Ether fell 1.1% to $2,720.26

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This story was produced with help from Bloomberg Automation.

–With assistance from Richard Henderson.

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