After weeks of limited data, investors will finally get fresh signals on the health of the US economy as agencies begin releasing key indicators, including the September employment figures on Thursday. Traders are also navigating a mix of risks — from stretched valuations in AI-related stocks to renewed strains in relations between China and Japan. Risk appetite is fading, with bitcoin sliding below US$94,000 and wiping out its year-to-date advance.
“November so far has seen a pretty wobbly ride for shares,” Shane Oliver, the chief economist and head of investment strategy at AMP Ltd, wrote in a note to clients. “Share markets remain at risk of a correction given stretched valuations, risks around US tariffs and the softening US jobs market.”
A slew of Fed officials have expressed scepticism over the need for a cut in December, or outright opposed one, less than a month after chair Jerome Powell warned that a December cut is far from a “foregone conclusion”. Investors have marked down the odds of a cut next month to less than 50% from almost fully pricing in a reduction before the Fed’s October meeting.
“While there will be questions about data quality, market participants will react to new information” and weigh the dollar, Commonwealth Bank of Australia strategists led by Joseph Capurso wrote in a note to clients. “We expect the non-farm payrolls report for September to underperform expectations of a 50,000 increase.”
See also: How China uses a ‘national team’ to influence trading
The yen was steady in early trading ahead of Japanese third quarter growth data which may provide justification for Prime Minister Sanae Takaichi compiling a hefty stimulus package. Japan’s real gross domestic product is forecast to contract by 2.4% in the three months through September on an annualized basis, the first decline in six quarters, according to economists’ estimates.
The potential for stimulus and a reduction in rate hike expectations following Takaichi’s appointment has placed fresh pressure on the yen. The currency slid to its weakest in nine months last week, leading to official warnings that moves have become one-sided. Any further weakening may increase angst over possible government intervention with the currency near levels that previously drew authorities into the market.
“Technically, USD/JPY is approaching levels where Japanese currency officials are expected to begin to verbally intervene more aggressively,” Tony Sycamore, a strategist at IG Markets, wrote in a note. “However, actual physical intervention is unlikely until the exchange rate reaches around 160 or higher, given the dovish stance of the new Japanese prime minister.”
See also: Stock sell-off extends in Asia as tech, silver rout worsens
In commodities, oil jumped 2.4% last Friday to settle above US$60 per barrel after Ukraine attacked a key Russian oil port and Iran seized a tanker near the Strait of Hormuz, injecting a fresh geopolitical premium into prices. Gold slid 2.1% as optimism over Fed cuts waned.
Uploaded by Isabelle Francis
