Global stock markets stabilized on Thursday (September 5th) after several days of decline. The start of September was bleak, with the yen reaching a one-month high and the government bond market performing strongly in the background of investor bets on interest rate cuts. However, due to continued uncertainty about the health of the US economy and the pace of potential interest rate cuts by the Fed, market sentiment remains cautious.
The previous market turmoil has wiped out over 2 trillion US dollars in global stock markets and hit the commodities market. However, the storm has eased slightly, allowing major European stock markets to remain stable in early trading, despite a nearly 2% decline in the past few days.
The Stoxx 600 index in Europe has remained relatively unchanged, with technology giant ASML Holding and luxury goods stocks leading the decline. Mining stocks have fallen for the fourth consecutive trading day as iron ore prices hit their lowest level since 2022.
German industrial order data exceeded expectations, and Eurozone retail sales data met expectations, while a series of key US data will be released later and on Friday, including the highly anticipated non-farm payroll report.
US futures contracts rose slightly, and investors will focus on the performance of Nvidia, one of the 'Big Seven', following its recent decline, as well as the release of service sector data and unemployment claims data.
Asian stock markets erased most of their gains after a decline in the Japanese market. The Japanese stock market closed lower due to a stronger yen and pressure on semiconductor-related stocks.
The market is focused on non-farm payrolls.
Investor attention will turn to US labor market data on Thursday evening Hong Kong time, which could help investors readjust their expectations for interest rates. However, the main event of the week will be Friday's non-farm payroll data, which will provide a clear direction for the market until the release of consumer price index (CPI) data next week.
Federal Reserve Chair Daley said on Wednesday that the Fed now needs to cut interest rates to maintain a healthy labor market, and future economic data will determine the extent of the rate cut.
Traders also hope to evaluate whether the US economy is heading towards a soft landing based on data, as the Fed is preparing to ease monetary policy. Earlier this week, global stock markets experienced their most severe decline since August 5th, and the Cboe Volatility Index remains high at 20.
Daniel Tan, portfolio manager at Singapore's Grasshopper Asset Management, said, 'September has always been a challenging month for risk assets in history.'
After Wednesday's US job vacancy data came in below expectations, and the Federal Reserve's beige book survey showed stagnant or declining economic activity, derivative traders increased their bets on the pace of rate cuts. Expectations for interest rate pricing this year include at least 100 basis points of rate cuts, including a substantial 50 basis point rate cut.
Jefferies analyst Mohit Kumar said, 'The market is very nervous, but our moderate long-term positions on risk assets remain unchanged despite recent market volatility. We don't believe that the US economy will slow down as much as feared.'
'We believe that the scenario of a soft landing in the US still exists, but we also acknowledge that the next two to three months may be a challenging period,' said Eddy Loh, Chief Investment Officer of Maybank Group Wealth Management, on Bloomberg TV. 'If the Fed cuts rates by 50 basis points, the market may see this as negative because it means that the Fed sees some issues in the economy.'
Benefiting from the situation,
Markets are betting that the Fed may start the long-awaited rate cut cycle this month, and it may even cut rates by 50 basis points at once, putting the US dollar on the defensive.
The yen has become the biggest beneficiary, soaring nearly 2% this week. The yen against the US dollar reached a one-month high of 143.20 overnight before falling to 143.61 during the European trading session.
In the bond market, Eurozone bond yields have fallen for the third consecutive trading day, while US Treasury yields remain at 3.765%. On Wednesday, they fell sharply due to slowing labor market data, and investors continue to worry about the health of major global economies.
Iron ore prices have fallen to around $90 per ton.
Brent crude oil futures are expected to see their first increase after four consecutive days of decline. They have already fallen by more than 7% since early September. OPEC+ is close to reaching an agreement to postpone the increase in oil production. Copper prices have also gradually rebounded to around $9,000, a nearly 20% decline since May.