Wall Bourse’s plunge into the red late Friday sets a negative tone for Monday’s Asian open, a stark reminder that investors are still far more inclined to sell into pockets of strength in riskier assets than push up.
August Purchasing Managers’ Index (PMI) reports on Monday in Australia, Japan, China and India could add to or lessen the overall sentiment of gloom, but last week’s close in the United States- United suggests that any relief may be fleeting.
US markets are closed for the Labor Day holiday, so liquidity will be weaker than usual, while European markets digest the news that Russia has dropped the Saturday deadline to resume flows via a important gas supply route to Germany.
The impact of Europe’s energy crisis on global financial markets cannot be ignored.
It was not to be so after Friday’s non-farm payrolls report painted a “Goldilocks” scenario for the US labor market for the Fed – slowing but still solid job growth, and cooling inflationary pressures due to slower earnings growth.
But equities failed to hold on to early gains, despite falling bond yields, implied interest rates and the dollar.
(GRAPH – 2-year yield gap between the United States and Japan:
)
The dollar will be watched closely, having hit a 24-year high against the yen on Friday, above 140.00 yen. Japanese Finance Minister Shunichi Suzuki said G7 financial leaders did not discuss currencies on Friday, but he insisted that sharp movements in exchange rates were not desirable.
Meanwhile, tensions between the United States and China continue to plague regional sentiment. The State Department on Friday announced a potential sale of military equipment to Taiwan for $1.1 billion, a move that the Chinese Embassy in Washington said “severely undermines relations between China and the United States.” States and peace and stability in the Taiwan Strait.”
Overall, a difficult environment for Asian markets on Monday.
Key developments that should provide more direction to the markets on Monday:
Australia services, composite PMI (August, final)
Japanese services, composite PMI (August, final)
China: Caixin Services PMI (August)
India: Services PMI (August)
South Korea’s foreign exchange reserves (August)