Asian shares were subdued on Thursday, as Japanese stocks fell to their lowest point in three weeks, driven by investor caution amid ongoing global economic uncertainties, Reuters reports.
The yen, benefiting from the flight to safer assets, hit a one-month high. Meanwhile, concerns about the US economy fueled speculation about possible Federal Reserve rate cuts.
Japanese stocks, reflected in the Nikkei index, dropped more than 1%, marking their lowest in three weeks. Tech-heavy markets in Taiwan and South Korea initially saw gains but ultimately closed slightly higher, giving up much of their earlier momentum. Across the region, the MSCI’s Asia-Pacific index, excluding Japan, managed a 0.25% gain after enduring a three-day losing streak, during which it lost nearly 3%.
In Europe, futures pointed to a weaker start for markets, with Eurostoxx 50 futures down 0.25%, alongside declines in Germany’s DAX and the UK’s FTSE futures.
September has historically been a challenging month for risk assets, and analysts like Daniel Tan, a portfolio manager at Grasshopper Asset Management, noted that some global investors may be taking profits after strong market performances in July and August.
Focus on U.S. Economic Data
Investors are closely watching economic data this week, particularly for clues about the US economy and labor market. Tuesday’s weaker-than-expected manufacturing numbers, combined with mixed labor data on Wednesday, have put markets on edge. The main focus now turns to the US services industry report and jobless claims data due on Thursday, along with Friday’s key nonfarm payrolls report for August, which is expected to offer clearer insights into the economy’s direction.
Speculation about the Federal Reserve’s next move has intensified. The likelihood of a 50-basis-point rate cut at the Fed’s September meeting has increased to 44%, up from 38% the previous day, as per the CME FedWatch tool. Traders are now expecting up to 110 basis points of rate cuts by the end of the year, with three Fed meetings remaining.
US job openings hit a 3.5-year low in July, indicating a cooling labor market. San Francisco Fed President Mary Daly has expressed the need for rate cuts to maintain labor market stability, though the extent of the cuts will depend on further economic data.
Yen Rises as Dollar Weakens
In the currency markets, the Japanese yen strengthened significantly as investors sought refuge from riskier assets. The yen climbed nearly 2% for the week, reaching 143.46 per dollar, near its one-month high of 143.20.
Treasury yields were steady during Asian trading, following a sharp decline in the previous session. The 10-year US Treasury note yield held at 3.765%, while the two-year yield remained mostly unchanged at 3.764%.
Commodities Edge Higher
In commodities, oil prices edged higher after a decline on Wednesday. Brent crude rose by 0.37% to $72.97, while US West Texas Intermediate crude increased 0.38% to $69.46.
As global markets remain volatile, analysts expect sentiment to stay fragile, with tech stocks in particular likely to face further downside pressure. However, some experts are encouraging investors to shift toward value sectors, such as telecommunications, healthcare, and infrastructure, which are seen as more stable in uncertain times.
