European stocks are poised for a muted opening today after Asian markets saw mixed movements amidst contrasting signals from the global economy. Investors are grappling with the prospect of potential Federal Reserve interest rate cuts amid persistent weakness in technology shares.
Euro Stoxx 50 futures showed little change, mirroring a similarly subdued sentiment in US stock futures which edged higher after declines on Wall Street yesterday. The Japanese yen strengthened against the dollar, while US Treasury yields remained steady ahead of crucial US inflation data scheduled later today.
Across Asia, stocks in Australia, Japan, Hong Kong, and South Korea posted gains, in line with the positive performance of US equity futures. However, Chinese shares, both in Hong Kong and mainland, experienced fluctuations.
Taiwanese stocks were the notable underperformers, plummeting by as much as 4.3% as trading resumed after disruptions caused by Typhoon Gaemi. This decline marked a sharp correction following earlier tech-related downturns in global markets, exacerbated by a significant drop in Taiwan Semiconductor Manufacturing Co., which fell by up to 6.5%.
Asian equities are on track for their first consecutive weekly losses since May, driven by a global shift away from technology stocks, particularly those associated with artificial intelligence, towards sectors that have lagged behind this year. The technology index in Asia is set for its third consecutive day of losses.
According to HSBC Holdings Plc strategists, there’s a growing sense that the peak of the Asian AI boom may be nearing, highlighting the rapid shift in market momentum and emphasizing the need for vigilant sector monitoring.
In China, government bond yields hit record lows amidst an extended bond rally, posing a challenge to policymakers aiming to stabilize the market. Meanwhile, the CSI 300 Index is heading towards its worst weekly performance since early February, reflecting investor preference for safe-haven assets amid concerns over a faltering economic recovery.
The yen continued to strengthen, trading below 154 per dollar amidst erratic market conditions, marking its fourth day of gains in five sessions. Inflation in Tokyo accelerated for the third consecutive month in July, reinforcing expectations of a potential interest rate hike at the upcoming central bank policy meeting next week.
Looking ahead, the focus will be on the upcoming US inflation data and the Federal Reserve’s policy meeting next week, with market participants closely watching for signals that could impact future interest rate decisions.
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