Asian markets were neutral on Monday, as concerns over the Chinese economy after the release of fresh depressing data countered euphoria over an anticipated interest rate cut by the US.
Data released on Friday indicated that the personal consumption expenditures index, the preferred inflation measure used by the Federal Reserve, declined in July in line with expectations, paving the way for the bank to loosen monetary policy this month.
The highly anticipated non-farm payrolls data, which will offer the most recent picture of the largest economy in the world, will soon be released.
While a cut has been priced in, the data could determine how big it will be, with analysts saying another big miss to the downside could prompt officials to slash rates by 50 basis points, rather than the expected 25.
A well-below-forecast reading last month fanned fears of a recession and sparked a rout across equities, though figures since then have soothed those concerns.
“The spending data continues the run of indicators suggesting that fears the rise in the unemployment rate signalled an imminent turn down in activity are misplaced,” said Taylor Nugent at National Australia Bank.
“But inflation data remains permissive should the Fed need to respond more assertively on the labour market.
“That leaves the focus squarely on payrolls on Friday as the key indicator ahead of the September 18 (rate) decision.”
By year’s end, he claimed, markets had factored in 100 basis points of cutbacks.
Asia failed to replicate Wall Street’s impressive finish, when all three indices ended significantly higher.
Hong Kong, Shanghai, Sydney, Seoul, Taipei, and Wellington all declined while Tokyo, Singapore, Manila, and Jakarta all rose.
Concerns over China’s economy shocked investor sentiment in August when it was revealed that the manufacturing sector in the nation shrank more than anticipated for the fourth consecutive month.
The news comes as leaders face calls to unveil fresh stimulus measures, particularly for the troubled property industry, with observers warning the government’s 5 percent GDP growth target could be missed this year.
“The world’s second-largest economy is sputtering, with factory activity lagging, deflationary pressures mounting, and the call for stimulus growing louder,” said independent analyst Stephen Innes.
“The services sector tried to pick up the slack, but growth there is almost invisible… signalling an economy barely managing a pulse.”
Meanwhile, news that OPEC and other major producers will move forward with a planned increase in supply starting next month caused oil prices to continue their sharp declines from the previous week.
This has lessened concerns about Middle East hostilities and disruptions to Libyan supplies.
