Asian shares were steady on Thursday as investors awaited a pivotal housing policy briefing in China, which has ignited hopes of additional support for the country’s faltering property sector. In the background, the U.S. dollar stood firm near two-and-a-half-month highs, buoyed by mounting predictions of a Donald Trump victory in the upcoming U.S. presidential election.
Global bond markets experienced a rally, driven by a significant drop in British inflation and speculation that the European Central Bank (ECB) is poised to announce its first consecutive rate cuts in 13 years.
With the world watching several key market events and data points unfold over the next two days, Thursday’s market moves offered a glimpse into investor sentiment across continents.
Asian Markets: Modest Gains Amid China Hopes
China’s housing policy has become a key factor influencing market dynamics, as investors eagerly await any signals from Beijing that might offer relief to the embattled property sector. With the sector facing its worst crisis in decades, a potential lifeline in the form of fresh policies or stimulus could be critical to stabilizing the Chinese economy.
Chinese stock markets saw modest gains in early trading. The Shanghai Composite rose 0.5%, reflecting cautious optimism, while the Hang Seng Index in Hong Kong outperformed with a 2% increase, signaling stronger sentiment from investors who are anticipating further government action.
Japan’s Nikkei 225 also advanced 0.2% in early trading, continuing its recent upward trend, while Australian shares surged 1% to reach a record high. The Australian rally was spearheaded by strong performances in the banking sector, which mirrored gains on Wall Street the previous day.
The prospect of a China policy shift is seen as crucial not just for domestic markets but for the broader global economic landscape. Any sign of support for the housing sector could boost Chinese growth and, by extension, commodity markets and economies reliant on China’s demand for goods and resources.
Focus on TSMC Results After ASML’s Soft Outlook
Amid the broader market movements, investors turned their attention to the chipmaking sector, particularly Taiwan Semiconductor Manufacturing Company (TSMC), as the company prepared to release its results. TSMC, a key player in global semiconductor supply chains, holds a critical position in both the technology sector and broader economic trends, especially given the ongoing challenges in the global chip industry.
The market focus on TSMC follows a softer-than-expected outlook from ASML, one of the world’s largest semiconductor equipment manufacturers, which had earlier indicated that demand for chipmaking equipment might remain weak due to slowing global technology investment.
Investors are keenly watching whether TSMC’s results will signal recovery in the semiconductor industry or whether it will confirm the ongoing supply chain challenges and slower growth that have plagued the sector throughout the year.
Dollar Strengthened by Trump’s Rising Chances
The U.S. dollar continued its upward march, reaching its highest levels in over two months as prediction markets and polls suggested that former President Donald Trump may be leading in the U.S. presidential race. As of Thursday, Trump’s chances of winning the election were seen as increasingly likely, and markets began to price in the potential impact of his policy proposals.
Analysts have pointed to Trump’s fiscal policies, particularly his stance on tariffs, tax cuts, and immigration, as likely to be inflationary. This has prompted a reassessment of future U.S. Federal Reserve policy, with investors anticipating fewer rate cuts should Trump’s policies spur economic growth.
Damien McColough, head of rates strategy at Westpac, noted, “It’s probably only in the last two or three days that the concept of a Trump victory is getting the U.S. dollar bid. His policies are seen as inflationary, which is negative for bonds but positive for the dollar.”
Trump’s position on cryptocurrency regulation has also been closely watched, as he and the Republican Party are expected to take a lighter approach to regulation. This has fueled a sharp rally in Bitcoin, which has risen 15% over the past week to trade at $67,615, nearing record highs.
Commodities Steady, Brent Crude Holds at $74.57
In commodities markets, Brent crude oil prices held steady at $74.57 per barrel after four consecutive sessions of losses. Market sentiment was bolstered by an unexpected drop in U.S. crude stockpiles last week, suggesting that demand for oil remained robust even as concerns over global economic growth lingered.
Gold remained near historic levels, trading at $2,677 per ounce as investors continued to seek safe-haven assets amid economic uncertainty and a potentially volatile U.S. election cycle.
Global bond markets enjoyed a rally on Thursday following a surprisingly large drop in British inflation, which has shifted expectations around future monetary policy. Data released on Wednesday showed that British inflation fell sharply to 1.7% on an annualized basis, much lower than anticipated. This decline has strengthened the case for further rate cuts from the Bank of England (BoE), with markets now pricing in a 90% chance of two 25-basis-point cuts before the end of the year.
The news sent shockwaves through foreign exchange and bond markets, with the British pound (GBP) falling 0.6% to its lowest level since August 20. Sterling traded at $1.2993, close to its overnight low, as traders prepared for aggressive selling in London markets. Brent Donnelly, president of Spectra Markets, noted in a client note, “My guess is that London will probably sell GBP aggressively … when they walk in.”
The inflation surprise also contributed to a decline in global bond yields. U.S. benchmark 10-year Treasury yields held steady at 4.03% in Asian trade, while the two-year yield remained at 3.95%.
Across the Atlantic, European bond markets were similarly buoyed by expectations of further monetary easing. The European Central Bank (ECB) is widely expected to announce its first back-to-back rate cut in over a decade, reflecting the eurozone’s persistent struggle with low inflation and sluggish economic growth.
Market Movers to Watch: U.S. Retail Sales and China’s GDP
Looking ahead, two key pieces of economic data are likely to drive markets over the next 48 hours. On Thursday, U.S. retail sales data is expected to provide a clearer picture of the health of the American consumer and the resilience of the economy as interest rates remain elevated.
On Friday, China is due to release its third-quarter gross domestic product (GDP) figures, which are expected to provide crucial insights into the state of the world’s second-largest economy. Analysts will be closely monitoring whether the data shows signs of stabilization or further deterioration, especially in light of China’s ongoing property market struggles and weakening demand for exports.
The Australian dollar saw a slight recovery in early Thursday trade, bouncing back from a one-month low after stronger-than-expected domestic employment data. Net employment in Australia blew past forecasts, prompting markets to push out expectations for a rate cut by the Reserve Bank of Australia (RBA). The Australian dollar was last up 0.5%, trading at $0.6697, while three-year bond futures fell 8 ticks.
As investors digest a flurry of economic data, corporate earnings, and geopolitical developments, markets remain finely balanced. The prospect of significant policy changes in China, coupled with the looming U.S. presidential election, continues to shape market sentiment across asset classes.
While Asian shares managed to hold steady on Thursday, the underlying currents of uncertainty — from Trump’s rising electoral prospects to ongoing inflation and interest rate questions — suggest that volatility is likely to persist in the coming weeks. Investors will be watching closely for any further developments that could offer clarity on the direction of the global economy as 2024 nears its end.
