Summary:
Asian stocks increased on Tuesday, September 3, led by Japanese shares, while the yen stabilized after weakening and falling against the dollar in the previous week.
Japanese and South Korean stocks increased, while stocks in Sydney declined. Chinese stock indices fluctuated at the start of trading, and futures for the S&P 500 index fell ahead of Wall Street's reopening later on Tuesday. The yen showed little change against the U.S. dollar after dropping for four consecutive sessions, though the Japanese currency is expected to remain weak for an extended period due to the differences in interest rates between the United States and Japan, according to Mark Matthews, the head of Asia research at Julius Baer. Matthews stated in an interview with Bloomberg Television: "We expect the Bank of Japan's interest rate to be half a percent by March next year, while the federal funds rate will be 4.5%—this still represents a significant gap of 400 basis points, and on this basis, we see the yen weakening."
Meanwhile, traders will approach this month with caution, as data shows that September has been a poor month for stocks in recent years. Additionally, the upcoming U.S. jobs report on Friday could be a factor in whether history repeats itself, providing critical insights into how quickly or slowly the U.S. Federal Reserve may cut interest rates, especially as the U.S. election campaign reaches its peak.
Traders expect the beginning of a monetary policy easing cycle in the United States this month, with about a one in four chance of a 50 basis point rate cut, according to data collected by Bloomberg. Strategists at JPMorgan Chase warned that the rise in the stock market could stall even if the Federal Reserve begins to lower interest rates, as any easing of policy would be a response to slowing or declining growth, while the seasonal trend for September would pose another obstacle. Valentin Marinov, head of foreign exchange strategy for the G10 at Crédit Agricole CIB, stated that labor market data indicating a very gradual slowdown in the U.S. job market could lead traders to adjust their expectations for interest rate cuts in favor of the dollar.
Marinov said in a statement to Bloomberg TV: “Markets may tend to adopt a more tolerant stance at the Fed’s September meeting, and the dollar may also regain some of its gains once markets realize that the Fed will move more cautiously in the coming period.”
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