(Bloomberg) -- Asian stocks are set for a cautious opening on Monday ahead of key central bank decisions in the region this week and the annual confab at Jackson Hole.
Equity futures in Australia and Japan were down while those for China and Hong Kong moved higher. US contracts were steady in early Asian trading after the S&P 500 rose 0.2% on Friday. The dollar was little changed, while Australian bond yields edged higher.
The calm start to the week comes ahead of US jobless claims and economic activity data, while Jerome Powell is expected to confirm Federal Reserve interest-rate cuts are on the cards when he speaks in Wyoming. The meeting caps a volatile period for global stocks, partially driven by concern the Fed wouldn’t reduce borrowing costs fast enough to prevent a deeper US slowdown.
“Financial markets will be sensitive to his every word,” Commonwealth Bank of Australia strategists led by Joseph Capurso wrote in a note. “We expect Powell to green light a cut on 19 September, but we expect Powell to retain optionality for delayed cuts or larger cuts subject to the next CPI and payrolls.”
Goldman Sachs at the weekend trimmed the probability of a US recession in the next year to 20% from 25%, citing last week’s retail sales and jobless claims data. If the August jobs report set for release on Sept. 6 “looks reasonably good, we would probably cut our recession probability back to 15%,” Goldman economists led by Jan Hatzius wrote in a report to clients on Saturday.
The S&P 500 rose for a seventh straight day on Friday as most megacaps gained, with Nvidia Corp. leading the charge. Nike Inc. saw its longest winning streak in more than eight years. Applied Materials Inc. sank after a sales forecast that disappointed investors looking for a bigger payoff from artificial-intelligence spending. Wall Street’s “fear gauge” - the VIX - dropped below 15.
Treasury 10-year yields fell three basis points to 3.88%, while the dollar had its third straight week of losses — the longest streak since March. Hedge funds turned bullish on Japan’s currency for the first time since 2021 after sharp swings in foreign-exchange markets led to a blow-up of a popular yen trade. Gold topped $2,500 on hopes the Fed is edging closer to cutting rates.
In Asia this week, investors will be looking to central bank meetings in Indonesia and South Korea for signs of policy easing, while the Thailand decision will be crucial following reports the nation’s new prime minister may abandon a key stimulus package.
China is expected to keep the 1- and 5-year loan prime rates steady after the People’s Bank of China last week pledged further steps to support economic recovery, while cautioning that it won’t be adopting “drastic” measures.
Elsewhere, geopolitics is likely to come to the fore as traders watch for more details on Kamala Harris’s economic plan as she is confirmed as the Democratic Party’s nominee at its convention this week. Traders will also be watching developments in the Middle East amid signs the latest attempt to achieve a hostage deal and cease fire is faltering, while the Russia-Ukraine war is escalating. Oil edged lower early Monday.
“How markets trade the stock markets around another “quiet” week for data, filled with more central bank decisions and guidance will be important in setting up the tone for a more hectic month end,” said Bob Savage, head of markets strategy and insights at BNY. “Further, expect the week ahead to be dominated by the unknowns of politics and geopolitics.”
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This story was produced with the assistance of Bloomberg Automation.