Asian Stocks Tumble As Risk-Off Sentiment Deepens Ahead Of Fed Announcement

Stocks in the Asia-Pacific region plunged on Monday as the risk-off mood intensified on concerns that the Federal Reserve may have waited too long to cut interest rates.

The Japanese benchmark plummeted over 3% while South Korea slipped over 2% in early trade. Futures contracts in China pointed to a steep decline. The Nikkei 225 was 2.15% lower at 35,636, and the Kospi was down 0.88% at 2,498 as of 8:03 a.m.

The risk-off sentiment deepened as the data that came in last week pointed that US jobs rose at a less-than-expected pace. This adds on the the pressures that the Federal Reserve faces on the size of the September rate cuts.

The non-farm payrolls rose in August by 1.42 lakh last month against the expected 1.65 lakh, leaving the three-month average at the lowest since mid-2020. The unemployment rate declined to 4.2%, the first drop in five months.

Federal Reserve Governor Christopher Waller said it’s important for the US central bank to begin cutting interest rates this month, but to be “open-minded” about the size of the cut. “The balance of risks has shifted toward the employment side of our dual mandate,” Waller said, adding that “policy needs to adjust accordingly.”

The latest payroll is not looking like a slowdown per se, but there are other pressures, Seth R Freeman, managing director, B Riley Advisory Services, told NDTV Profit. Consumer spending is very low and consumer credit is getting pushed, which will have a real effect on the US economy, Freeman said.

The Fed will be looking at a 25 basis point cut and then evaluate how it is going forward for the October meeting, according to Freeman. The markets will take the 25 bps as neutral as most of the movement is already priced in, he said.

Traders shift focus to the upcoming CPI data in the US due on Sept. 11, hoping that it may aid the Fed in shifting focus to a soft landing.

The Japanese stocks fell the most as the country's GDP came in less than expected. Japan's second-quarter GDP grew 2.9% on an annualised basis versus the estimate of 3.2%.

Meanwhile, in a bid to revive the stalling economy, China will fully open its manufacturing sector to foreign investments and will allow more overseas capital in its health sector.

The CPI print for the South Asian country is also due during the day. The consensus is for the CPI to rise to 0.7% year on year from 0.5% in July, according to Bloomberg.

The US employment data failed to cheer investors. Stocks in the US were sent sliding to record their worst week since March 2023. The S&P 500 and Dow Jones Industrial Average slipped 1.73% and 1.01%, respectively. The Nasdaq Composite rose 2.55%.

Traders are pricing in at least a quarter-point worth of easing this month, though some are still betting on a bigger move, according to Bloomberg.

Brent crude was trading 1.31% higher at $71.99 a barrel as of 8:16 a.m. IST. Gold was down 0.03% at $2,498.26 an ounce.

• US Dollar Index at 101.25

• US 10-year bond yield at 3.74%

• Brent crude up 1.31% at $71.99 per barrel

• Bitcoin was up 1.05% at $54,947.46

• Gold was up 0.03% at $2,498.26 an ounce.