SYDNEY, Sept 16 (Askume) – Asian shares opened cautiously on Monday as the United States is also expected to begin a round of policy easing this week, with the only question being how much of a rate cut it will be.
The Bank of Japan and the Bank of England are also scheduled to meet this week, with both countries expected to remain steady for the time being, while the busiest data includes US retail sales and industrial production.
Republican presidential nominee Donald Trump faced a second assassination attempt on Sunday, according to the FBI , making the geopolitical problems he faces more pressing than ever.
Holidays in China, Japan, South Korea and Indonesia keep conditions tense and opening activity moderate. MSCI’s broadest index of Asia-Pacific shares outside Japan (.MIAPJ0000PUS) was roughly flat after rising 0.8% last week.
Japan’s Nikkei share average (.N225) fell, but futures traded at 36,315 points and spot prices closed at 36,581 points as a recent rise in the yen put pressure on exporters. S&P 500 futures were little changed, while Nasdaq futures fell 0.1%.
Eurostoxx 50 futures and FTSE futures were slightly stronger.
Economic data released by China over the weekend was disappointing, with industrial production growth falling to a five-month low in August, while retail sales and new home prices weakened further.
CBA Mining and Energy analyst Vivek Dhar said: “If China is to achieve its growth target of around 5% in 2024, these figures provide a strong case for additional economic stimulus measures before the end of the year.”
“We believe that if China’s real estate and infrastructure sectors recover again in September, policymakers will consider increasing central government spending on infrastructure projects.”
As for the Fed, an early surge in futures markets has pushed the probability of a half-percentage point rate cut to 59%, up from 30% last week. The outlook fell sharply after media reports revived the possibility of more aggressive easing.
“We agree it will be a close race, but we also believe the Fed will do the ‘right’ thing and raise rates by 50 basis points,” said JPMorgan economist Michael Feroli.
“The case for a 50 basis point cut seems clear to us: Various iterations of the Taylor rule suggest that the policy is now a full percentage point and even more restrictive,” he added.
If the Fed hikes interest rates by another half basis point, Feroli expects policymakers to cut rates by 100 basis points this year and 150 basis points in 2025.
The market expects a rate cut of 114 basis points before Christmas and a rate cut of 142 basis points next year.
Japanese Yen jumps
Analysts at ANZ Bank said there have been three rounds of easing in the past three decades, each with interest rates cut by more than 25 basis points, but each time there were concerns that the market would fall into recession, but now this concern no longer exists.
The prospect of aggressive measures boosted bonds generally, with the two-year yield falling to 3.593%, the lowest level since September 2022.
The Bank of England is widely expected to keep interest rates steady at 5.00% at its meeting on Thursday, although the market sees a 31% chance of another rate cut.
The Bank of Japan meets on Friday and is widely expected to be on hold, though it could lay the groundwork for further tightening in October.
The South African Central Bank could also ease policy this week, while the Norges Bank is still on hold.
A drop in U.S. Treasury yields boosted the yen, which rose to 140.53 yen against the dollar after falling 0.9% last week to a nearly nine-month low.
The euro was steady at $1.1,090 as the European Central Bank cut interest rates further, keeping the currency at $1.1,200.
CAD/USD held steady at 1.3580 after Bank of Canada Governor Tiff Macklem opened the way for a significant rate cut in an interview with the Financial Times .
Gold prices were supported by lower bond yields, which hovered around $2,582 per ounce, close to its record high of $2,585.99.
Oil prices rose as about a fifth of crude production in the Gulf of Mexico was shut down.
Brent crude rose 19 cents to $71.78 a barrel, while US crude rose 28 cents to $68.93 a barrel.
