Global markets steady as investors eye US jobs data, Fed rate cut prospects

SINGAPORE: Stocks were muted, the dollar steadied near five-week lows and gold climbed to fresh record highs on Tuesday, as investors awaited a string of economic data this week that could reinforce expectations of a Federal Reserve rate cut in September.
Markets are pricing in an 89 per cent chance of a 25-basis-point cut later this month, but the strength of upcoming US data will determine whether the Fed might consider a larger move. The spotlight is on Friday’s nonfarm payrolls report, preceded by job openings and private payroll figures, which will offer a clearer picture of the labour market — now at the centre of policy debate.
“While an outsized 50 bps cut in September is not the base case, it cannot be ruled out altogether if the August jobs data shows exceptional weakness”, said Vasu Menon, managing director of investment strategy at OCBC Bank.
The US inflation report, due September 11 — just a week before the Fed’s policy meeting — will also prove decisive.
The prospect of lower borrowing costs has kept Wall Street near record highs, with global equities also gaining in recent weeks. On Tuesday, MSCI’s broadest index of Asia-Pacific shares outside Japan was flat. Nasdaq futures slipped 0.1 per cent, while European futures edged down 0.07 per cent. With US markets closed on Monday for a holiday, Asian trading lacked clear direction.
“It is all about gauging whether the Fed remains ahead of a possible slowdown in the US economy, or if it’s behind the curve”, said Kyle Rodda, senior market analyst at Capital.com.
Chinese equities, buoyed by a recent AI-driven rally, pulled back as investors booked profits. The blue-chip CSI300 index dropped 0.9 per cent after touching a three-year high earlier in the session, while Hong Kong’s Hang Seng eased 0.6 per cent after a 2 per cent surge on Monday.
In currencies, the dollar regained some ground ahead of the European open. The euro slipped 0.16 per cent to $1.1692, while sterling fell 0.17 per cent to $1.3526. The yen weakened 0.3 per cent to 147.70 per dollar after Bank of Japan Deputy Governor Ryozo Himino signalled caution on further tightening amidst global uncertainty. The dollar index was up 0.2 per cent at 97.847, though still close to Monday’s five-week low. Yields on 10-year US Treasuries rose 2.4 basis points to 4.249 per cent.
Political tensions around Fed independence also weighed on sentiment. Reports that President Donald Trump is seeking to fire Fed Governor Lisa Cook have raised concerns over future appointments. Cook is expected to challenge the dismissal on Tuesday. Trump has long criticised Fed Chair Jerome Powell for not cutting rates, recently targeting costly renovations at the Fed’s Washington headquarters. Treasury Secretary Scott Bessent reiterated that the Fed should remain independent, but acknowledged it had “made a lot of mistakes”.
In commodities, gold surged on the weaker dollar and rate cut outlook, touching a record high of $3,508.5. Oil prices rose amidst fears of supply disruptions from the Russia-Ukraine conflict. Brent crude gained 0.4 per cent to $68.44 a barrel, while US West Texas Intermediate jumped 1.42 per cent to $64.92. — Reuters