On Monday, November 4, US equity markets started the week in negative territory. The Dow fell 0.61%, with the Nasdaq Composite Index and the S&P 500 down 0.33% and 0.28%, respectively.
Uncertainty over the US presidential election kept investors cautious, with national polls showing a narrow race as election day approached.
On Monday, US factory orders declined by 0.5% in September after falling 0.8% in August. However, the data had a limited impact on sentiment toward the Fed rate path. According to the CME FedWatch Tool, the probability of a 25-basis point December Fed rate cut slipped from 82.7% on November 1 to 81.7% on November 4.
Friday’s US Jobs Report solidified market expectations of a 25-basis point rate cut in November, with odds reaching 98.0%.
On Tuesday, service sector data from China drew investor interest. The Caixin Services PMI increased from 50.3 in September to 52.0 in October. Tuesday’s PMI data indicated further that China’s recent stimulus measures were taking effect. On Friday, November 1, the all-important Caixin Manufacturing PMI signaled a return to expansion, rising to 50.3 in October.
According to the Services PMI Survey:
Improving staffing levels was significant as markets expect Beijing to roll out stimulus measures to boost private consumption.
Dr. Wang Zhe, Senior Economist at Caixin Insight Group, remarked on China’s private sector, stating,
“In late September, the Politburo noted emerging economic challenges and emphasized the need to focus on key areas. Following this, a series of new policies were rolled out. The Caixin manufacturing and services PMI surveys showed that market demand stabilized and optimism improved, early signs of the new policies’ impact.”
However, Dr. Zhe also raised concerns about the labor market, which remains under strain because of the manufacturing sector, stating,
“The effectiveness of these new policies in improving domestic demand, employment and livelihoods will require close monitoring. Additionally, achieving China’s 2024 growth target will depend on a sustained recovery in consumer demand. That means policy efforts should focus on increasing household disposable income.”
In Asian markets, the Hang Seng Index gained 0.71% on Tuesday morning. Upbeat Services PMI data from China and hopes for new policy measures from Beijing boosted demand for HK-listed stocks.
However, the gains were relatively modest as investors considered the implications of a Trump victory in the US presidential election. Trump has warned of 60% tariffs on Chinese goods, potentially impacting demand for HK and Mainland China-listed stocks.
Real estate and tech stocks contributed to the morning gains. The Hang Seng Mainland Properties Index and the Hang Seng Tech Index advanced by 1.43% and 0.59%, respectively. Tech giants Alibaba (9988) and Baidu (9888) rose by 1.04% and 1.02%, respectively.
Mainland China’s equity markets also advanced, with the CSI 300 and the Shanghai Composite gaining 0.73% and 0.76%, respectively.
In Japan, the Nikkei Index advanced by 1.26% on Tuesday morning. Japan’s markets reopened after Monday’s holiday, reacting to Friday’s US Jobs Report and rising bets on a December Fed rate cut. A weaker Japanese Yen supported demand for Nikkei Index-listed export stocks. The USD/JPY was up 0.09% to 152.261 on Tuesday.
Tokyo Electron (8035) and Sony Corp. (6758) rallied 2.02% and 2.73%, respectively, while Nissan Motor Corp. (7201) gained 1.96%.
The ASX 200 Index declined by 0.45% on Tuesday morning, bucking the positive broader market trend. Banking and tech stocks reversed their gains from Monday, contributing to the losses. The S&P/ASX All Technology Index was down by 0.53% in the morning session.
Banking stocks Westpac Banking Corp. and ANZ (ANZ) saw losses of 1.45% and 0.93%, respectively. Investors continued to react to Westpac’s earnings results from Monday as full-year profits slid by 3%.
Uncertainty about Tuesday’s RBA interest rate decision and policy outlook tested buyer demand for ASX 200-listed stocks. An RBA signal to maintain the cash rate at 4.35% until 2025 could further impact the ASX 200. Conversely, an unexpected rate cut could reverse the morning’s losses.
Looking ahead, investors should consider the US Presidential Election and National People’s Congress Standing Committee (NPCSC) meeting-related news. Fresh stimulus from Beijing may fuel demand for riskier assets. However, a Trump victory may counter any Beijing policy measures. Stay informed with our latest news and analysis to manage your risks effectively.
With over 20 years of experience in the finance industry, Bob has been managing regional teams across Europe and Asia and focusing on analytics across both corporate and financial institutions. Currently he is covering developments relating to the financial markets, including currencies, commodities, alternative asset classes, and global equities.