HONG KONG: Asian equities edged higher on Wednesday (Aug 6) as traders weighed Donald Trump’s trade war and fresh data that indicated further weakness in the US economy but added to interest rate cut speculation.
The US president’s claim that Washington was “very close to a deal” to extend a China truce provided some optimism, though that was tempered by his warning of fresh levies on pharmaceuticals and chips.
After a strong start to the week sparked by hopes that painful jobs data will force the US Federal Reserve to lower rates next month, another batch of figures added fuel to the fire.
A closely watched index of services activity showed it had barely grown in July as companies contended with weaker hiring conditions and rising prices.
The news came after Friday’s jobs data revealed far fewer US jobs were created than expected in May, June and July.
“Market pricing has moved aggressively in favour of a September rate cut by the Federal Reserve, after a weak July jobs report and ugly revisions to May and June signalled the US labour market may finally be cracking under the pressure of tariffs,” said Neil Wilson at Saxo Markets.
“The data pushed the US closer to stagflationary territory,” he said.
“So far, the market has held up and looked beyond the tariff risks, but we may at last be seeing the hard data finally catch up with the soft survey data.”
But while bets on a rate cut in September have soared, he said such a move was not a certainty.
Stocks fluctuated through the morning but went into the afternoon on a more positive note.
Tokyo, Shanghai, Singapore, Sydney, Seoul, Wellington, Manila, Bangkok and Jakarta rose, while Hong Kong was marginally higher. Taipei and Mumbai were in the red.
London, Paris and Frankfurt enjoyed healthy buying in the morning, while Wall Street futures also advanced.
