Markets mostly fell Thursday as investors struggled to keep up with Wall Street's rally, despite fresh data reinforcing optimism the Federal Reserve could hold off any more interest rate hikes this year, while another weak China reading dragged the mood.
New York traders cheered news that fewer jobs were created in the US private sector and second-quarter growth was less than initially thought, suggesting the economy was softening after more than a year of monetary tightening.
The readings came a day after figures on job openings and consumer confidence that were seen as giving the Fed room to step back from pushing borrowing costs higher.
Investors now put the chances of another lift this year at less than 50 percent.
The prospect of a less hawkish approach from the US central bank has provided a much-needed boost to equities this week, having endured a painful August.
Focus is now on Thursday's release of the US central bank's preferred gauge of inflation, the personal consumption expenditures (PCE) price index, which will be followed by readings on factory activity and non-farm payrolls for August.
"Investors are reacting with a 'bad news is good news' approach, betting that a slowing economy will lead to a less aggressive Federal Reserve," Mark Hackett, at Nationwide Funds Group, said.
However, there is now a worry that the data will continue to come in below forecast and the economy could slip into recession.
"This has calmed investors, but adds an element of risk if the pendulum continues to swing, as an earnings recovery is critical for a continued strong market," Hackett added.
Meanwhile, China on Thursday revealed that factory activity shrank again this month while services weakened, which will likely pile further pressure on authorities to press ahead with measures to kickstart the sputtering economy.
Officials have announced a series of pledges to help various sectors -- particularly the property industry -- and there is an expectation that more is on the way.
In the latest measure, local reports Thursday said the central bank is drawing up policies that will make it easier for private firms, including developers, to access funding.
However, analysts say the only thing that will appease investors is a wide-ranging "bazooka" of big spending.
"There remains an undercurrent of optimism regarding additional policy measures anticipated for China," said SPI Asset Management's Stephen Innes.
"Nevertheless, tenacious economic apprehensions concerning China persist. The current perspective on China's growth trajectory has become increasingly fixated on the pivotal policy choices that Chinese authorities must navigate."
Fresh data showing the country's manufacturing sector contracted for a fifth straight month in August added to the arguments for more help.
And the need to provide support to the embattled real estate sector was highlighted Wednesday when industry giant Country Garden reported losses of about $6.7 billion for the first half of the year and warned of possible default.
The company's cash flow problems have ignited fears that it could collapse and spread turbulence through China's economy and financial system.
It is due to hold a vote later Thursday by bondholders on extending repayment terms.
Hong Kong and Shanghai fell along with Seoul, Taipei, Mumbai, Bangkok, Jakarta and Manila while Tokyo, Sydney, Singapore and Wellington rose.
London and Paris fell at the open.
Banking giant UBS surged more than five percent at the open in Zurich after posting a $29 billion net profit in the second quarter amid its takeover of fallen rival Credit Suisse, which saw over $10 billion in losses.
It also said the merger would cause 3,000 job cuts in Switzerland in the coming years.
- Key figures around 0715 GMT -
Tokyo - Nikkei 225: UP 0.9 percent at 32,619.34 (close)
Hong Kong - Hang Seng Index: DOWN 0.6 percent at 18,378.08
Shanghai - Composite: DOWN 0.6 percent at 3,119.88 (close)
London - FTSE 100: DOWN 0.2 percent at 7,460.92
Dollar/yen: DOWN at 145.97 yen from 146.23 yen Thursday
Euro/dollar: DOWN at $1.0908 from $1.0925
Pound/dollar: UP at $1.2708 from $1.2719
Euro/pound: DOWN at 85.84 pence from 85.87 pence
West Texas Intermediate: FLAT at $81.64 per barrel
Brent North Sea crude: FLAT at $85.83 per barrel
New York - Dow: UP 0.1 percent at 34,890.24 (close)
Artificial Intelligence Analysis
Analysts Summary:
Markets mostly fell on Thursday, as investors reacted to news of fewer jobs created in the US private sector and second quarter growth less than initially thought, suggesting the economy was softening after more than a year of monetary tightening. This news gave investors optimism that the Federal Reserve could hold off any more interest rate hikes this year, and the likelihood of such a move is now below 50%. Investors are reacting with a “bad news is good news” approach, betting that a slowing economy will lead to a less aggressive Federal Reserve.
However, there is now a worry that the data will continue to come in below forecast and the economy could slip into recession. Meanwhile, China revealed that factory activity shrank again this month while services weakened, leading to further pressure on authorities to press ahead with measures to kickstart the sputtering economy.
The past 25 years have seen significant events and trends in the space and defense industry, such as the dissolution of the Soviet Union, the establishment of the European Union, and the emergence of the US as the worlds preeminent superpower. This articles content is highly relevant to defense industry analysts, as it discusses the potential implications of the US Federal Reserves monetary policy decisions on the broader economy. Stock market analysts are also likely to be interested in the articles content, as it looks at the impact of economic data on the markets. Finally, general industry analysts might be interested in the article as it discusses the potential impacts of Chinas weakening economy on global markets.
There are correlations between this article and the significant events and trends in the space and defense industry, including the role of the US Federal Reserve in managing the economic impact of international events and the potential for global economic slowdown. However, there are discrepancies between this article and the events of the past 25 years, as it does not take into account the rise of new economic powers such as India and China.
Investigative
Question:
- 1. What specific measures could the US Federal Reserve take to help stimulate the economy in the event of a recession?
- 2. How have the US Federal Reserves policies changed over the past 25 years?
- 3.
How has the emergence of new economic powers such as India and China impacted the space and defense industry? 4. What other economic trends have been observed in the past 25 years that could impact the markets?
5. What are the potential implications of a global economic slowdown for the defense industry?
This AI report is generated by a sophisticated prompt to a ChatGPT API. Our editors clean text for presentation, but preserve AI thought for our collective observation. Please comment and ask questions about AI use by Spacedaily. We appreciate your support and contribution to better trade news.
