RPT-GLOBAL ECONOMY WEEKAHEAD-China fears linger as focus on Fed sharpens

31 Aug 2015 | Author: | No comments yet »

Another rough markets week?.

European stocks headed for their worst month in four years, as the Federal Reserve indicated it’s ready to increase rates, even as the turmoil roiling Chinese markets shows no sign of abating.Hong Kong – Global financial markets looked set for another rough week on Monday, with stocks and commodities falling ahead of data that could give clues on when the US will raise interest rates and surveys which are likely to point to further weakness in China.The dollar was lower against the yen and the euro in Asian trade Monday, with weakness in Asian stock markets again prompting flights to the perceived safety of the Japanese and eurozone currencies.

Confusion over policy direction in the world’s two largest economies sent global markets into turmoil early last week, with the wildest price swings in years pushing investors to the exits. Global markets are bracing for Chinese data on Tuesday, which are expected to show the world’s second-largest economy is continuing to lose momentum. Markets will therefore be watching business surveys, factory orders and trade data from the world’s largest economy as well as the employment numbers due on Friday. “The week finishes with non-farm payrolls for August, typically the biggest market mover globally, and definitely on the Fed’s radar given ‘unemployment’ is already close to full employment and the Fed looking to gauge whether there is ‘some’ further labour market improvement,” economists at National Australia Bank said. The UK market is closed for a public holiday. “This is a market that is walking on glass; China seems to be the central theme feeding into a lot of these things but today the focus is very much on US interest rates again,” said, James McGlew, executive director of corporate stock broking at Argonaut in Australia. MSCI’s broadest index of Asia-Pacific shares outside Japan shed more than 1 percent and is set to fall 10 percent this month, its worst monthly drop since May 2012.

Market participants pointed to a Financial Times report that China will avoid massive share purchases after an over $200 million two-month spree to support stocks, which sparked concerns about another round of a stock market sell-off. They have plunged more than 40 percent since mid-June. “A pull back in the market was to be expected as some investors are taking profits after the two-day rally,” wrote Gerry Alfonso, director of Shenwan Hongyuan Securities, referring to a brief rebound late last week. Speaking at the U.S. central bank’s annual gathering in Jackson Hole, Wyoming, Fisher emphasized he was not saying what action the Fed might take at its September meeting but analysts took his comments to mean he saw the economy moving close to satisfying the Fed’s conditions for a hike. Almost half a year since the ECB started pumping 60 billion euros a month of fresh cash into the economy, annual inflation data, due on Monday, will probably still show prices rose only 0.1 percent in August – nowhere near the bank’s 2 percent target ceiling. Investors sold $5.9bn of emerging market assets between August 20 and 26, a sharp increase from $1.5bn the week earlier, Nomura fund flows data showed.

There is a growing chance the ECB will extend its stimulus programme beyond the planned completion in September 2016, and if inflation data misses expectations that likelihood will only increase. An index for Asian high-yield credit has fallen sharply compared with a relatively steady performance in the investment grade index, according to Thomson Reuters data. Investors will focus on China’s manufacturing data for August scheduled to be released Tuesday and events such the G-20 finance ministers’ meetings in Turkey, with focus shifting later in the week to the U.S. jobs data due Friday, said Mr.

The dollar eased 0.4% to ¥121.15 after rising to the week’s high of ¥121.76 on Friday following the Fed officials’ comments that kept prospects of a September hike alive. The market will watch Thursday’s policy meeting to see if the European Central Bank will be inclined to ease monetary policy further in the wake of the recent global markets turmoil, though no imminent change is expected. US crude was down 0.8% at $44.86 a barrel after jumping more than 6% on Friday on frenetic short-covering fuelled by violence in Yemen, a storm in the Gulf of Mexico and refinery outages. Verified email addresses: All users on Independent Media news sites are now required to have a verified email address before being allowed to comment on articles.

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