(Nov 4): Asian equities edged lower on Tuesday along with equity-index futures after weaker US economic data and uncertainty over the Federal Reserve’s (Fed) policy outlook weighed on sentiment.
A gauge of the region’s shares fell 0.2%, diverging from gains in tech stocks in the US. Contracts for the S&P 500 fell 0.3% after the underlying index posted a modest gain on Monday, although more than 300 members in the index actually retreated. Nasdaq 100 futures fell 0.4% with Palantir Technologies Inc falling more than 4% in extended trading on concerns about the company’s lofty valuation after a record run-up.
A gauge of the dollar extended its gains to a fifth day, strengthening against all other Group-of-10 currencies and trading at levels last seen in August. The greenback’s advance has come amid mixed signals from Fed officials, following chair Jerome Powell’s warning last week that a rate cut in December isn’t a foregone conclusion.
US factory activity shrank in October for an eighth straight month, reflecting softer production and demand, and Fed officials gave mixed signals on the path ahead for interest-rate cuts. Even so, global stocks have rallied for seven straight months since the tariff-fuelled sell-off in April, driven increasingly by technology heavyweights and prompting calls for broader-market consolidation.
“Asia’s taking a breather after a strong run,” said Billy Leung, an investment strategist at Global X Management. “With US data softening and Fed officials keeping policy optionality alive, investors are reassessing positioning rather than chasing risk.”
See also: Asian stocks, US futures rise as October optimism continues
Economists and policymakers are relying more on private reports such as the ISM survey for clues on the economy and job market in the absence of official data because of the US government shutdown. Friday’s scheduled employment report is also poised to be delayed as a result.
The Institute for Supply Management’s manufacturing index eased 0.4 point to 48.7, according to data released on Monday. Readings below 50 indicate contraction, and the measure has been stuck in a narrow range for most of this year.
Gold edged lower for a third consecutive session. Treasuries steadied, while oil fell as the market weighed Opec+’s decision to pause output hikes.
See also: BofA’s Hartnett sees gold, China stocks as best AI boom hedges
Meanwhile, Fed governor Lisa Cook said she sees the risk of further labour-market weakness as greater than the risk that inflation will pick up. She stopped short of endorsing another interest-rate cut next month.
“Looking ahead, policy is not on a predetermined path,” Cook said. “We are at a moment when risks to both sides of the dual mandate are elevated. Every meeting, including December’s, is a live meeting.”
Her comments echoed remarks from her colleagues who were equally noncommittal about whether the central bank should deliver a third straight rate reduction when policymakers convene in December.
Chicago Fed president Austan Goolsbee warned he’s more concerned about inflation than jobs. His San Francisco counterpart Mary Daly said officials should “keep an open mind” about the possibility of a December cut. Governor Stephen Miran noted policy remains restrictive.
Elsewhere, shares in Australia fell ahead of a central bank rate decision later on Tuesday, when policymakers are expected to stand pat.
“Concerns over high valuations persist, and the Fed’s policy outlook appears murkier,” said Ulrike Hoffmann-Burchardi at UBS Global Wealth Management. “Despite the strong gains in equity markets this year, we continue to believe that this bull market has room to run.”
Corporate highlights:
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- Palantir Technologies Inc raised its annual revenue outlook to US$4.4 billion and outpaced analyst estimates for third-quarter sales, citing “accelerating and otherworldly” growth for its artificial intelligence and data analytics products.
- Starbucks Corp is selling a majority stake in its China unit to private equity firm Boyu Capital for US$4 billion to help accelerate its coffee house business in the country.
- Grab Holdings Ltd raised its earnings forecast for the year after quarterly profit topped estimates, signalling robust demand for the Southeast Asian ride-hailing and food delivery firm’s new products.
- Netflix Inc is in talks to license video podcasts distributed by iHeartMedia Inc as it looks to compete head on with YouTube, according to people familiar with the conversations.
Some of the main moves in markets:
Stocks
- S&P 500 futures had fallen 0.3% as of 10.41am Tokyo time on Tuesday
- Japan’s Topix rose 0.5%
- Australia’s S&P/ASX 200 fell 0.7%
- Hong Kong’s Hang Seng rose 0.4%
- The Shanghai Composite rose 0.1%
- Euro Stoxx 50 futures were little changed
Currencies
- The Bloomberg Dollar Spot Index rose 0.1%
- The euro fell 0.1% to US$1.1505
- The Japanese yen was little changed at 154.35 per dollar
- The offshore yuan was little changed at 7.1275 per dollar
Cryptocurrencies
- Bitcoin rose 0.2% to US$107,129.93
- Ether rose 1.2% to US$3,644.23
Bonds
- The yield on 10-year Treasuries was unchanged at 4.11%
- Japan’s 10-year yield advanced two basis points to 1.675%
- Australia’s 10-year yield advanced two basis points to 4.35%
Commodities
- West Texas Intermediate crude fell 0.2% to US$60.94 a barrel
- Spot gold fell 0.4% to US$3,986.57 an ounce
Uploaded by Tham Yek Lee
