EQUITIES
Hong Kong’s Hang Seng index led losses among Asia-Pacific markets in Monday trade, with shares of embattled Chinese developer China Evergrande Group continuing to drop. The Hang Seng index dropped 3.31% in Monday afternoon trade. Shares of China Evergrande Group in the city plummeted 14%.
The S&P/ASX 200 in Australia fell 1.85%, and the Straits Times index in Singapore slipped 0.37%, while the S&P BSE Sensex in India gained 0.24%.
Markets in mainland China, Japan and South Korea are closed on Monday for holidays.
European stocks are also expected to head for a lower opening on Monday as global markets contend with concerns over the U.S. Federal Reserve’s tapering timetable.
Over on Wall Street, stocks have struggled in the seasonally weak month of September, with the Dow Jones Industrial Average seeing three straight weeks of losses — its first in 2021.
OIL
Oil prices eased on Monday, extending losses from Friday as energy companies in the U.S. Gulf of Mexico restarted production, although nearly a quarter of the output remained offline in the wake of back-to-back hurricanes.
The Brent now traded at $74.82 per barrel, while U.S. crude futures traded at $71.35 per barrel.
On Friday last week, the Brent ends at $75.34 a barrel, and the WTI at $71.97 per barrel.
CURRENCIES
The dollar began the week firmly on Monday with investors in a cautious mood ahead of several central bank meetings.
Higher U.S. yields has combined with general risk aversion to benefit the dollar which was up near a one-month high at 93.315 on a basket of currencies.
GOLD
Gold prices inched lower on Monday, pressured by a firmer dollar, while investors awaited guidance from the U.S. Federal Reserve regarding the bond-buying programme.
Spot gold dipped 0.17% to $1,750.90 per ounce, while U.S. gold futures edged slightly lower to $1,750.70.
Silver fell to $22.32 per ounce, having hit its lowest level since Nov 2020 earlier in the session. Platinum fell 2.15% to $910.60, while palladium gained slipped 1.78% to $1,9840.50.
ECONOMIC OUTLOOK
Stocks mostly lower on Monday amid challenges from the debt crisis at China Evergrande Group and some jitters ahead of the U.S. Federal Reserve’s highly anticipated September meeting, which starts Tuesday.
The fate of Chinese property giant Evergrande, and its $300 billion in liabilities, is also in the balance with a bond interest payment due on Thursday. Shares of Evergrande plunged over 15% on Monday, extending losses as investors take a dim view of its business prospects. Concerns about the health of China's economy and Beijing's crackdown on tech firms continues to haunt the region with stocks in Hong Kong especially hard-hit last week.
Market participants will be closely watching the Fed's two-day meeting starting on Tuesday, where it is expected to lay the groundwork for a tapering of its bond buying programme. The markets' consensus is that it will stick with broad plans to begin tapering this year but will hold off providing details or a timeline for a at least a month.
Aside from Evergrande and the prospect of reduced Fed stimulus, financial markets also face risks from uncertainty over the outlook for President Joe Biden’s $4 trillion economic agenda as well as the need to raise or suspend the U.S. debt ceiling. Treasury Secretary Janet Yellen said the U.S. government will run out of money to pay its bills sometime in October without action on the debt ceiling, warning of “economic catastrophe” unless lawmakers take the necessary steps.
The week also will be graced with no less than a dozen central bank meetings, highlighted by the Federal Reserve which is likely to take another step toward tapering. Central banks in the EU, Japan, UK, Switzerland, Sweden, Norway, Indonesia, the Philippines, Taiwan, Brazil, South Africa, Turkey, and Hungary all have meetings this week.
TECHNICAL OUTLOOK
[USDJPY]
Important Levels to Watch for Today:
- Resistance line of 110.070 and 110.191.
- Support line of 109.828 and 109.707.
Commentary/ Reason:
The dollar was rangebound on the Japanese yen at 109.917.
Higher T-note yields supported moderate gains in the dollar along with weakness in stocks, which fuelled some liquidity demand for the dollar.
On the other hand, the Japanese yen found some bidding over the rising concerns of the Delta variant in the Asia-Pacific region.
Market participants will be closely watching the Fed's two-day meeting on Wednesday, while the is no expectation of policy shifts at the resolutely dovish Bank of Japan, also on Wednesday.
The USD/JPY pair has bounced back and seems likely to continue the horizontal trading within a tighter range. Overall, longer-term price action remains bullish with the 110.07 and 110.191 price line as a target.
