(Bloomberg) — Stocks hovered near record highs at the start of the week, with investors anticipating an interest-rate cut in the Federal Reserve’s upcoming policy meeting.
The MSCI All Country World Index held steady after closing at an all-time high Friday. MSCI’s Asia equity index edged up 0.1%, also trading near a record high. There will be no cash trading in Treasuries during Asian hours as Japan is closed for a holiday. Chinese shares rose almost 1%, shrugging off weak factory and consumer data.
The Hong Kong dollar extended its gains to hit a four-month high as supply of the currency continued to tighten toward the end of the quarter. French bond futures opened mostly steady in Asian trading after Fitch Ratings downgraded France to A+ from AA-.
The key question for investors this week is whether Fed officials will push back against market bets on a series of interest-rate cuts extending into next year. In addition to the Fed’s decision on Wednesday, the Bank of Canada, the Bank of England and the Bank of Japan are also set to announce policy decisions this week.
“The week is going to be all about central bank decisions. Of course, the biggest one will be the Fed, which is all but certain to cut interest rates by 25 basis points,” wrote Kyle Rodda, a senior market analyst at Capital.com in Melbourne. “The question is how aggressive the Fed is with this easing, with the markets effectively pricing in a cut at each of the final three meetings of the year.”
In China, economic activity slowed more than expected for a second straight month with a sharp slump in investment.
“China’s August data are hardly inspiring—exports remain under tariff pressure while the property downturn continues to weigh on domestic demand,” said Charu Chanana, chief investment strategist at Saxo Markets in Singapore. “Yet, markets are shrugging it off, with cash-rich households rotating into equities and AI momentum powering chip stocks higher.”
On the tariff front, the US-China talks focused on trade, the economy and the status of ByteDance Ltd.’s TikTok, which faces a deadline this week to reach a deal to continue operations in the US. Officials were also expected to lay the groundwork for a potential meeting between President Donald Trump and Xi Jinping as soon as October.
The Trump administration is expected to again extend a Sept. 17 deadline for Bytedance to divest the US assets of TikTok or shut it down, Reuters reported, citing an unidentified person familiar with the matter.
Separately, Asian primary bond markets had a busy start this week with about a dozen issuers offering notes across currencies or mandating banks for potential deals. That’s adding to a global deal rush this month, as borrowers make the most of tight spreads that are signaling confidence in companies’ credit strength.
What Bloomberg’s Strategists Say…
“Global equities are likely to draw fresh momentum as traders price for the Federal Reserve to deliver its first rate cut since December 2024 and signal that there may be more to come. The US dollar will weaken should policymakers reinforce easing bets.”
— Mary Nicola, Markets Live strategist. Click here for the full analysis.
Still, the Fed’s policy meeting will remain the key focus as markets question whether officials push back against bets of easing at each remaining meeting this year. A quarter-point reduction is seen as a sure thing when the Fed announces its policy decision Wednesday, with a small potential for a half-point move amid signs US job growth is slowing rapidly.
The Fed is likely to deliver a dovish cut with at least one member in favor of a 50 basis point reduction, and new forecasts that imply a steeper easing path to guard against a weakening labor market, said Elias Haddad, a senior market strategist at Brown Brothers Harriman. “A dovish Fed policy stance can drag US dollar lower and support risk assets.”
Trump predicted a “big cut” from the Federal Reserve this week ahead of a pivotal meeting at which the central bank’s governors are expected to ease policy for the first time in nine months.
Elsewhere, Fitch Ratings downgraded France to A+ from AA- late Friday. The score is now a notch lower than the UK and on par with Belgium, indicating the upheaval of repeated government collapses has locked the country into an enduring battle to contain a swelling debt burden.
France’s 10-year benchmark bonds offer one of the highest yields in the euro area, akin to Lithuania, Slovakia and Italy. The premium paid over German peers has nearly doubled since President Emmanuel Macron called elections last year, a sign of weaker investor demand.
Corporate News:
ANZ Group Holdings Ltd. will pay a A$240 million ($160 million) fine after admitting misconduct across its institutional and retail divisions, the culmination of a months-long investigation by the corporate watchdog into one of the country’s biggest lenders. Singapore’s GIC Pte is in talks to sell its stake in US landlord Yes! Communities Inc. to Brookfield Asset Management in what could be one of the biggest exits for the sovereign wealth fund in years, according to a person with knowledge of the matter. Contemporary Amperex Technology Co.’s Hong Kong-listed shares surged on Monday, thanks to a prominent upgrade and expectations for stronger earnings outlook. Chinese chip stocks jumped after the country launched an anti-dumping investigation targeting certain US-made semiconductors, boosting expectations for the domestic industry. Shares of toymaker Pop Mart International Group Ltd. slumped the most since April on Monday after JPMorgan Chase & Co. downgraded the stock to neutral. Some of the main moves in markets:
Stocks
S&P 500 futures were little changed as of 11:48 a.m. Tokyo time Australia’s S&P/ASX 200 fell 0.3% Hong Kong’s Hang Seng rose 0.4% The Shanghai Composite was little changed Euro Stoxx 50 futures rose 0.1% Currencies
The Bloomberg Dollar Spot Index was little changed The euro was little changed at $1.1728 The Japanese yen was little changed at 147.54 per dollar The offshore yuan was little changed at 7.1211 per dollar Cryptocurrencies
Bitcoin fell 0.4% to $115,432.84 Ether was little changed at $4,619.4 Bonds
Australia’s 10-year yield advanced six basis points to 4.28% Commodities
West Texas Intermediate crude rose 0.5% to $63.02 a barrel Spot gold was little changed This story was produced with the assistance of Bloomberg Automation.
–With assistance from Winnie Hsu, Tian Chen and Harry Suhartono.
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