By Noel Landiwich
(Reuters) – Noel Landewych looks at the future of Asian markets.
Asian investors will be prepared on Monday to accept that the U.S. is almost certain to ease monetary policy in September after Federal Reserve Chairman Jerome Powell confirmed in a speech on Friday that the U.S. is ready to cut interest rates.
“It is time to adjust policy,” Powell said in a keynote speech at the Kansas City Federal Reserve’s annual economic conference in Jackson Hole, Wyoming, as the risks of rising inflation have receded and the risks of falling employment have increased.
Powell’s comments sent the yen higher and the dollar weaker, making the Japanese currency more attractive as interest rates fell relative to Japanese rates.
The dollar/yen hit its lowest level since Aug. 6 in late trading Friday.
Geopolitical risks rose over the weekend as Hezbollah fired hundreds of rockets and drones into Israel early Sunday morning, and the Israeli military said it had attacked Lebanon with about 100 jets to try to stop a larger attack. It was one of the biggest clashes in more than 10 months of border warfare and raised the possibility that Israel’s war in Gaza could turn into a wider conflict.
Investors will also be concerned about the outlook for Japanese interest rates after Bank of Japan Governor Kazuo Ueda reaffirmed his intention to raise rates if inflation continues to reach the 2% target on Friday.
Ueda’s comments came as data showed Japan’s core inflation accelerated for a third straight month in July, complicating the central bank’s decision to raise rates further as demand-led price growth slows.
The average stock price rose 0.4% after Rep. Ueda’s testimony in Congress on Friday.
After trying all year to shore up the plunging yuan, China’s central bank suddenly finds itself with the opposite problem, deploying subtle methods to prevent its currency from rising too much.
The yuan, usually a restrained currency, strengthened 1.3% against the dollar in August, boosted by expectations that the Federal Reserve would cut interest rates and strengthen the Japanese yen.
Liu Jin, vice chairman and president of Bank of China, resigned on Sunday, the state-owned lender said, adding that its board of directors had approved Chairman Ge Haijiao to act as acting president.
The political situation in the United States offered little new certainty to global investors after Vice President Kamala Harris clinched the Democratic nomination for president with a powerful speech on Thursday, offering a sharp contrast between her broad foreign policy principles and her Republican rival and former President Donald Trump.
With 11 weeks to go until the White House primary, odds on a Harris win are trading at 55 cents on the PredictIt political betting platform, with a potential payout of $1.
The contract award, which follows President Trump’s victory by announcing that he would impose tariffs of up to 60% on all Chinese goods, is 49 cents.
The tariffs have been in the spotlight since China’s Ministry of Commerce met with automakers and industry associations last week to discuss raising import duties on large gasoline vehicles, which also sounded the alarm ahead of the European Union’s decision on tariffs on Chinese electric cars.
On Friday, the United States added 105 Russian and Chinese companies to a trade blacklist over their support for the Russian military.
Here are some key developments that could provide further direction to Asian markets on Monday:
– Singapore Manufacturing (July)
– Japanese Leading Indicators (Revised) (June)
