By Ankur Banerjee
SINGAPORE (Reuters) – Asian stocks fell on Tuesday as investors fretted over an impending U.S. interest rate cut and awaited earnings from artificial intelligence darling Nvidia, while rising tensions in the Middle East and supply concerns dampened risk sentiment and pushed up oil prices.
Gold prices were close to hitting a record high, while the dollar strengthened and the yen hovered near a three-week high as investors sought safety amid geopolitical risks, with Israel and Lebanon’s Hezbollah trading fire on Sunday. [GOL/] [FRX/]
The announcement by the eastern Libyan government to close all oil fields, halting production and exports, also supported crude prices. [O/R]
Investors are on edge ahead of Nvidia’s earnings release on Wednesday, where anything less than stellar forecasts from the AI chipmaker could shake investor confidence in the AI-powered rally.
MSCI’s broadest index of Asia-Pacific shares outside Japan was down 0.36% on Tuesday, pulling back from a one-month high hit in the previous session.
Japan’s Nikkei fell 0.16%, while Chinese stocks were also down.
China’s CSI300 stock index fell 0.28% while Hong Kong’s Hang Seng index was down 1% in early trade, dragged down by weak profits at Temu’s parent company PDD Holdings due to weak consumer spending.
Canada’s decision, following the lead of the United States and the European Union, to impose a 100% tariff on imports of Chinese electric vehicles and a 25% tariff on steel and aluminum imported from China also weighed on sentiment.
POWELL’S PIVOT
In a highly anticipated speech, Federal Reserve Chairman Jerome Powell on Friday endorsed an imminent start to interest rate cuts, setting the stage for the Fed’s September meeting.
“With the Fed now firmly in charge, markets will be watching the data closely,” said Gary Dugan, CEO of the Global CIO Office.
Investors’ attention will be focused on the U.S. personal consumption price index – the Fed’s preferred gauge of inflation – due out on Friday, followed by the August jobs report next week.
Markets are fully priced in for a 25 basis point rate cut from the Fed next month, with 100 basis points of easing expected over the next three meetings this year.
Mansoor Mohi-Uddin, chief economist at the Bank of Singapore, said Powell did not specify the size of the Fed’s next rate cuts, noting that it “will depend on incoming data, the evolving outlook and the balance of risks.”
“We continue to see the Fed delivering two 25 basis point rate cuts this year to benefit risk assets. We think a 50 basis point cut next month is likely only if the jobs report shows a further rise in unemployment.”
The yen was slightly lower at 144.67 per dollar, giving up some of its safe-haven gains from the previous session which saw it hit a three-week high of 143.45 per dollar.
The dollar index, which measures the U.S. currency against six rivals, was at 100.84, close to a 13-month low of 100.53 hit in the previous session.
Oil prices paused in early trade on Tuesday after rising 3% in the previous session on supply concerns following escalating tensions in the Middle East and production cuts in Libya.
Brent crude futures were down 0.45% at $81.06 a barrel, but not far from the two-week high of $81.58 hit on Monday.
U.S. crude futures fell 0.5% to $77.01 a barrel, but remained close to a one-week high of $77.60 hit overnight.
Gold prices fell to $2,511 an ounce on Tuesday, just below the record high of $2,531.60 reached on August 20.
(Reporting by Ankur Banerjee, Editing by Shri Navaratnam)
