Traders extended a global rally Tuesday ahead of US data this week that could be key to the Federal Reserve's decision-making on interest rates.
Hong Kong and Shanghai enjoyed big gains following fresh promises of help for China's economy, but worries about the outlook continue to dampen sentiment, with authorities facing growing calls for bigger stimulus to revive growth.
After a painful August on trading floors, investors have enjoyed a positive start to this week, with Federal Reserve boss Jerome Powell's insistence that monetary policy would be based on a range of indicators fuelling hope the tightening cycle has drawn to a close.
This week sees the release of the US central bank's preferred gauge of inflation, the personal consumption expenditures (PCE) price index, as well as jobs creation and factory activity.
"The trio should tell investors where critical factors in the Fed's decision tree on rates lie following the central bank's gathering in Jackson Hole last week and ahead of a scheduled meeting in September," said Stephen Innes at SPI Asset Management.
While inflation is easing, Fed officials have warned it remains too high at 3.2 percent -- well above their two percent target -- and that borrowing costs might have to rise or at least remain elevated until they are satisfied prices have been tamed.
That, however, has led to concerns that they could deal a blow to the economy.
Anthony Saglimbene, at Ameriprise, said: "Investors want to see economic releases this week that suggest activity is slowing enough to keep further rate hikes at bay, but not too slow to indicate the economy is headed for a recession."
Asian markets were up across the board.
Hong Kong climbed more than one percent thanks to a surge in tech giants, while Tokyo, Sydney, Seoul, Singapore, Mumbai, Bangkok, Manila, Wellington, Taipei and Jakarta were also up.
London returned from a long weekend to see healthy gains, while Paris and Frankfurt extended their Monday advance.
- China stimulus hopes -
Shanghai rose again, helped by China's weekend decision to slash the stamp duty paid on stock trades for the first time in 15 years as leaders try to revitalise the beleaguered market.
On Monday, Finance Minister Liu Kun and National Development and Reform Commission chairman Zheng Shanjie said they would provide more policy support and speed up government spending, according to the official Xinhua news agency.
Still, observers say equities are unlikely to recover until the government announces a wide-ranging "bazooka" support package like the $550 billion doled out in 2008.
"The measures over the past weekend are not enough to stem the downward spiral" and their impact will be short-lived if further help for the economy is not forthcoming, said Ting Lu, at Nomura Holdings.
"Without additional and more aggressive policy stimulus, these stock-markets-focused policies alone have little sustainable positive impact."
Those sentiments were echoed by Alvin Tan, head of Asia FX strategy at RBC.
He said in a note: "It's becoming obvious that much more significant stimulus, particularly from the fiscal side, will be needed to change the bearish outlook on mainland markets, including the renminbi."
Hopes for a softer reading on jobs and inflation weighed on the dollar, which weakened against its main peers, though the yen remains weighed by the Bank of Japan's refusal to move away from its ultra-loose monetary policy.
Gol
dman Sachs strategists warned that if the BoJ sticks to its guns, then the yen could fall to around 155 per dollar over the next six months, which would be its weakest since 1990.
- Key figures around 0810 GMT -
Tokyo - Nikkei 225: UP 0.2 percent at 32,226.97 (close)
Hong Kong - Hang Seng Index: UP 2.0 percent at 18,484.03 (close)
Shanghai - Composite: UP 1.2 percent at 3,135.89 (close)
London - FTSE 100: UP 1.2 percent at 7,426.72
Dollar/yen: DOWN at 146.39 yen from 146.50 yen on Monday
Euro/dollar: UP at $1.0822 from $1.0820
Pound/dollar: UP at $1.2616 from $1.2600
Euro/pound: DOWN at 85.78 pence from 85.85 pence
West Texas Intermediate: UP 0.2 percent at $80.28 per barrel
Brent North Sea crude: UP 0.3 percent at $84.65 per barrel
New York - Dow: UP 0.6 percent at 34,559.98 (close)
Artificial Intelligence Analysis
Defense Industry Analyst:
8/10
The article highlights the importance of the US data to the Federal Reserves decision making on interest rates. This is relevant to the defense industry, as the US military budget is partially dependent on the rate of interest rates set by the Federal Reserve. Additionally, the article discusses the potential impacts that a change in interest rates could have on the US economy, which could have implications for the defense industry in the form of reduced military spending.
Stock Market Analyst:
9/10
The article highlights the impact that US data could have on the Federal Reserves decision making on interest rates. As such, this is highly relevant to stock market analysts, as any changes to the rate of interest rates could have a significant impact on stock prices. Additionally, the article discusses the potential impacts that a change in interest rates could have on the US economy, which could have implications for the stock market in terms of increased or reduced investor confidence.
General Industry Analyst:
8/10
The article highlights the importance of the US data to the Federal Reserves decision making on interest rates. This is relevant to the general industry, as changes to the rate of interest rates could have a significant impact on the cost of borrowing for businesses and consumers. Additionally, the article discusses the potential impacts that a change in interest rates could have on the US economy, which could have implications for the general industry in terms of increased or reduced demand for products and services.
Analyst Summary
:
This article discusses the potential impacts of the US data that will be released this week on the Federal Reserves decision making on interest rates. The article notes that the US central banks preferred gauge of inflation, the Personal Consumption Expenditures (PCE) price index, will be released, alongside jobs creation and factory activity data. Any changes to the rate of interest rates could have a significant impact on the US economy and various sectors, including the defense industry, stock market, and general industry. Analysts should consider the implications of the US data for the Federal Reserves decision making on interest rates and how it could affect the various sectors.
Comparison to Significant Events and Trends in the Space and Defense Industry Over the Past 25 Years:The potential impacts of the US data on the Federal Reserves decision making on interest rates is significant, as any changes to the rate of interest rates could have a major impact on the US economy and various sectors, including the defense industry. Over the past 25 years, there have been significant events and trends in the space and defense industry, such as the development of advanced technologies and the introduction of new weapons systems. However, these events and trends are largely independent of the Federal Reserves decision making on interest rates, as the rate of interest rates does not directly affect the development of new technologies or the introduction of new weapons systems.
Investigative
Question:
- 1. How could changes to the rate of interest rates affect the defense industry?
- 2. How could changes to the rate of interest rates affect the stock market?
- 3.
How could changes to the rate of interest rates affect the general industry?4. What are the potential implications of the US data for the Federal Reserves decision making on interest rates?
5. How could changes to the rate of interest rates affect the US economy?
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