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What’s happening: Asian stocks were mixed on Tuesday amid concerns over China’s economic growth.
What happened: Equity markets in Japan recorded gains on Tuesday, while Hong Kong’s Hang Seng declined.
China’s stock markets remained under pressure, following downbeat economic data over the weekend.
Why it matters: Data released on Monday showed factory activity in China shrinking for the fourth month in a row in August, which raised concerns around whether the world’s second-largest economy will be able to meet growth projections this year.
China’s official NBS manufacturing PMI declined to 49.1 in August, from a reading of 49.4 in the prior month. The figure also missed market expectations of 49.5. The NBS Composite PMI Output Index fell to 50.1 in August, from July’s reading of 50.2, signalling the weakest reading since December 2022.
China has been struggling with a housing market crisis and disinflation. Markets expect the country’s government to announce fresh stimulus to jumpstart the economy.
Japan also released a weak manufacturing report, which raised speculations of the Bank of Japan deferring its plans to raise interest rates. On the other hand, markets expect the US Federal Reserve to begin cutting interest rates this month.
The interest rate differential between Japan and the US has kept the Japanese yen under significant pressure over the past couple of years. Markets await the strengthening of the Japanese yen, as the BoJ raises and the Fed cuts rates.
Japan’s Nikkei 225 gained 0.60% to 38,932.64 in the morning session on Tuesday. The Japanese yen strengthened against the US dollar after recording losses last week. The USD/JPY fell to 146.91 this morning.
China’s Shanghai Composite slipped 0.06% to 2,809.31, while Hong Kong’s Hang Seng Index fell 0.53% to 17,598.76.
What to watch: Investors will continue monitoring China’s economic growth and any announcement of stimulus from the government. Markets await the NFP (non-farm payrolls) report from the US, as this could influence the Fed’s next rate decision.
Context: The CAD/USD forex pair edged lower on Tuesday, with US and Canadian markets remaining closed on Monday for the Labor Day holiday.
Details: Investors continued monitoring the Bank of Canada’s monetary policy outlook, with the central bank scheduled to announce its policy decision on Wednesday.
Data released last week showed the Canadian economy growing by 0.5% in the second quarter, accelerating from the 0.4% growth in the prior quarter. This also marked the second straight quarter of growth.
The CFIB’s Business Barometer in Canada rose to a two-year high of 56.8 in August. Canada’s government budget surplus shrank to C$0.94 billion in June, from C$2.11 billion in the year-ago month.
The US dollar remained stable this morning, exerting slight pressure on the CAD/USD forex pair. The US dollar index, which measures the greenback’s performance versus a basket of major peers, was almost flat at 101.65.
Some strength in the price of crude oil, one of Canada’s major exports, limited the overall losses for the loonie. WTI crude oil futures gained around 0.8% to $74.10 a barrel this morning.
The CAD/USD forex pair fell 0.06% to 1.3504 this morning. The S&P/TSX Composite Index had gained 0.51% to close at 23,346.18 on Friday.
What to watch: Investors await the release of data on manufacturing PMI from Canada today. The S&P Global Canada manufacturing PMI, which declined to 47.8 in July, is expected to improve to 48.5 in August.
Other Markets: European indices closed mixed on Monday, with the FTSE 100 and STOXX Europe 600 Index down by 0.15% and 0.02%, and the DAX 40 and CAC 40 up by 0.13% and 0.20%, respectively.
Ukraine’s foreign minister Dmytro Kuleba urged Asian partners to consider providing further military aid to the country in its ongoing war with Russia. The news sent the RUB/USD slightly lower in forex trading this morning.
Australia’s current account deficit widened to A$10.7 billion in the second quarter, from A$6.3 billion in the first quarter. The figure coming in worse than market expectations of a A$5.9 billion deficit exerted pressure on the AUD/USD forex pair.
New Zealand’s merchandise (goods) terms of trade rose by 2.1% in the second quarter, versus a 5.1% decline in the prior quarter, which sent the NZD/USD pair lower in forex trading this morning.
Mexico’s S&P Global manufacturing PMI declined to 48.5 in August. This being the weakest reading in two years exerted pressure on the MXN/USD forex pair.
Brazil’s S&P Global manufacturing PMI slipped to 50.4 in August, from July’s reading of 54.0. The region’s manufacturing activity remaining in the expansion zone sent the BRL/USD pair higher in forex trading this morning.
France’s government budget value, Spain’s unemployment change, Turkey’s inflation rate and producer prices, Brazil’s GDP growth rate and IPC-Fipe inflation, South Africa’s GDP growth rate, Mexico’s unemployment rate and gross fixed investment, US Redbook index, S&P Global manufacturing PMI, construction spending, RealClearMarkets/TIPP economic optimism index, ISM manufacturing PMI, Logistics Manager’s Index and total vehicle sales, Argentina’s tax revenue, as well as Spain’s consumer confidence.
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