Global equities are facing a cautious tone as investors grapple with growing concerns around the U.S. presidential election and China’s economic outlook. Following a lackluster session in Asia, European equities are poised to follow suit, while U.S. stock futures indicate a modest advance. The yen, which had been under pressure for three days, strengthened as Japan’s finance minister expressed concerns about rapid currency movements.
Euro Stoxx 50 futures showed slight declines, mirroring the broad weakness in Asian equities, where China led the losses. Japan’s Finance Minister Katsunobu Kato warned of rapid, one-sided moves in the currency market, leading to a reversal in the yen’s recent slump against the dollar.
In the U.S., benchmark 10-year Treasury yields fell by three basis points, unwinding the previous day’s rise, which had taken yields to a near three-month high. The U.S. dollar also retreated slightly, while oil prices rebounded after Wednesday’s decline, with traders monitoring Middle East tensions and supply-demand dynamics heading into 2025.
U.S. Election Tightens as Risk Sentiment Weakens
The U.S. presidential race between Donald Trump and Kamala Harris is adding uncertainty to the markets, with the two candidates statistically tied in key swing states according to a Bloomberg News/Morning Consult poll. This tight race is contributing to global investor anxiety, particularly in Asia, where market sentiment is mixed amid lingering uncertainties about the economic landscape and geopolitical risks.
According to Jun Rong Yeap, a market strategist at IG Asia Pte, “Recent strength in the U.S. dollar and a surge in Treasury yields remain a source of reservation for aggressive risk-taking in the region.”
Asian equities, which rallied nearly 5% in September, have since lost momentum, as traders evaluate whether China’s stimulus measures are sufficient to stimulate sustained economic growth. Investors are also monitoring the pace of the Federal Reserve’s easing policy, with swap traders expressing uncertainty about the likelihood of further rate cuts in the remaining policy meetings for 2024.
Chinese Market Sentiment Remains Unsettled
Despite China’s recent efforts to boost its economy through stimulus, there are still doubts about whether these measures will bring about a meaningful recovery. Vanessa Xu, Chief Investment Officer at VS Partners, noted that “there is still some doubt whether the stimulus changes things fundamentally.” She described the recent volatility in Chinese stocks as “a tug of war between tourist money and serious long money,” highlighting the precarious nature of the country’s market.
Corporate Developments in Tech and Automobiles
In the tech space, Taiwan Semiconductor Manufacturing Co. (TSMC) halted shipments to one of its clients after discovering that some chips produced for the client were delivered to Huawei Technology Co., potentially violating U.S. sanctions. This development is significant amid ongoing tensions between the U.S. and China regarding technology exports.
In South Korea, SK Hynix Inc. shares rose after the company posted record profits and revenue for the third quarter, buoyed by strong demand in the semiconductor sector. Meanwhile, Hyundai Motor’s third-quarter operating profit missed expectations, contributing to the overall cautious sentiment in Asian markets.
Outlook and Risks Ahead
As the global economic and political landscape becomes more uncertain, particularly with the looming U.S. elections, market volatility is expected to persist. Investors are closely watching developments in the U.S. as well as China’s economic recovery efforts, while also considering the impact of higher U.S. yields and the potential for further currency fluctuations.
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