Asian stocks dragged down by Wall St decline, upbeat bonds By Reuters

By Wayne Cole

SYDNEY (Reuters) – Asian stock markets fell on Monday after worries about a possible U.S. economic recession weighed on Wall Street, while bond yields and commodity prices fell as investors shunned risk assets for safer havens .

bore the brunt of the anticipated sell-off as the stronger yen pressured exporters, losing 2.4 percent on top of a nearly 6 percent drop last week.

MSCI’s broadest index of Asia-Pacific shares outside Japan fell 0.6 percent, after losing 2.25 percent last week.

and Nasdaq futures were both a fraction lower after Friday’s slide.

Federal funds futures were little changed as investors wondered whether the mixed August U.S. payrolls report would be enough to tip the Federal Reserve to cut rates by 50 basis points when it meets next week.

So far, markets are implying just a 29 percent chance of a big cut, in part because of comments from Fed Governor Christopher Waller and New York Fed President John Williams on Friday, although Waller left open the option of aggressive easing.

“Our reading of the data is that the labor market continues to cool, but we see no sign of a rapid deterioration in conditions that would require a rate cut of 50 basis points,” said Barclays economist Christian Keller.

“Importantly, we also see no indication of any appetite for this in Fed communications,” he added. “We maintain our call for the Fed to start its cycle with a 25 basis point cut, followed by two more 25 basis point cuts at the remaining two meetings this year, and a total of 75 basis point cuts next year”.

Investors are considerably wiser and have priced in 115 basis points of easing until Christmas and another 127 basis points for 2025.

August US consumer price data on Wednesday should underline the case for a reduction, if not the size, with headline inflation seen slowing to 2.6% from 2.9%.

ECB TO MAKE IT EASY

Markets are also fully pricing in a quarter-point cut from the European Central Bank on Thursday, but are less certain whether it will ease in both October and December.

“What matters will be the direction beyond September, where there is strong pressure from both sides,” TD Securities analysts said in a note.

“Wage growth and service inflation remain strong, encouraging the hawks, while growth indicators are weaker, encouraging the doves,” they added. “Quarterly cuts are likely more in line with new forecasts.”

The prospect of global policy easing boosted bonds, with 10-year Treasury yields hitting 15-month lows and two-year yields the lowest since March 2023.

The last 10-year was 3.734% and the two at 3.661%, leaving the curve close to steepest since mid-2022.

Falling yields encouraged a further recovery in yen trading that sent the greenback down as low as 141.75 yen on Friday, before holding at 142.41 earlier in the month.

The euro held steady at $1.1090, after briefly reaching $1.1155 on Friday. (USD/)

China’s consumer price (CPI) data, due later in the month, is expected to show the Asian giant remains a force for disinflation, with producer prices seen falling 1.4 percent year-on-year in August.

CPI is expected to rise to 0.7% for the year from 0.5%, mainly due to higher food prices.

China’s trade account figures due on Tuesday are expected to show a slowdown in both export and import growth.

Also Tuesday, Democrat Kamala Harris and Republican Donald Trump debate for the first time ahead of the Nov. 5 presidential election.

In commodity markets, falling bond yields kept gold down at $2,496 an ounce and short of its recent all-time high of $2,531. (EMPTY/)

Oil prices found support after suffering their biggest weekly decline in 11 months amid lingering concerns about global demand. (OR)

added 57 cents to $71.63 a barrel, while consolidating 60 cents to $68.27 a barrel.