Singapore — Asian stocks fell on Tuesday as investors pondered looming US interest rate cuts and awaited earnings from artificial intelligence (AI) darling Nvidia, while rising tension in the Middle East and supply concerns checked risk sentiment and propped up oil prices.
Gold prices were just shy of a record peak, while the dollar steadied and the yen hovered near its highest in three weeks as investors sough safety amid geopolitical risks, with Israel and Lebanon’s Hezbollah exchanging fire on Sunday.
Also supporting crude prices was Libya’s eastern-based government announcement of the closure of all oilfields, which halted production and exports.
Investors are on edge ahead of Nvidia’s earnings report on Wednesday, where anything short of a stellar forecast from the chipmaker could jolt investor confidence in the AI-fuelled rally.
MSCI’s broadest index of Asia-Pacific shares outside Japan was 0.48% lower on Tuesday, inching away from the one-month high it touched in the previous session.
European bourses were due to open slightly higher, with Eurostoxx 50 futures rising 0.08%, German DAX futures up 0.13% and FTSE futures 0.35% higher. The London stock market will resume trade after a holiday on Monday.
China’s blue stock index CSI300 fell 0.61% while Hong Kong’s Hang Seng index was 0.27% lower, dragged by lacklustre earnings from Temu-parent PDD Holdings due to lower consumer spending.
Also weighing on sentiment was the move by Canada, following the lead of the US and EU, to impose a 100% tariff on imports of Chinese electric vehicles and a 25% tariff on imported steel and aluminium from China.
Powell pivot
In an eagerly awaited speech, Federal Reserve chair Jerome Powell on Friday endorsed an imminent start to interest rate cuts, putting the focus on the Fed’s September meeting.
“The Powell speech gave everything a decent boost on Friday,” said Ben Bennett, Asia-Pacific investment strategist at Legal and General Investment Management.
“But I think investors are now waiting for PCE [personal consumption expenditures] on Friday as well as the preliminary European inflation numbers at the end of the week.”
Investor attention will be on the US PCE price index — the Fed’s preferred gauge of inflation — due on Friday and then the August payrolls report next week.
Markets are fully priced for a 25 basis point (bp) cut from the Fed in September, with 100bps of easing expected in the next three meetings of the year.
Mansoor Mohi-Uddin, chief economist at Bank of Singapore, said Powell did not clarify the size of the Fed’s upcoming rate cuts noting it “will depend on incoming data, the evolving outlook, and the balance of risks”.
“We continue to see the Fed making two 25bps rate cuts this year to the benefit of risk assets. We think a 50bps cut next month is only likely if the payrolls report shows another jump in unemployment.”
The yen was last at ¥144.645 to the dollar, giving up some of its safe haven gains from the previous session which saw it rise to a three-week high of ¥143.45 to the dollar.
The dollar index, which measures the US currency against six rivals, was little changed at 100.84, close to a 13-month low of 100.53 it touched in the previous session.
Oil prices took a breather in early trading on Tuesday after rising 3% in the previous session due to supply concerns in the wake of escalating tension in the Middle East and production cuts in Libya.
Brent crude futures were 0.21% lower at $81.26 a barrel, but not far from the two-week high of $81.58 it touched on Monday.
US crude futures eased 0.32% to $77.17 a barrel but remained close to a one-week high of $77.60 it touched overnight.
Gold prices fell 0.39% to $2,507.12/oz on Tuesday just below the record high of $2,531.60 reached on August 20.
Reuters
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