Asian stock markets reflect mixed trend in countdown to US NFP data
- Asian equity markets trade mixed, while focus shifts to the US NFP data.
- Soft US ADP Employment Change has set an unfavorable backdrop for the US NFP data.
- US President Trump doesn’t expect renewed conflict with Iran to last too long.
Stock markets in the Asian region demonstrate a mixed performance as investors shift their focus to the United States (US) Nonfarm Payrolls (NFP) data for August, which will be released on Friday.
At press time, Nikkei225 is slightly down to near 64,250, Shanghai trades 0.2% higher to near 3,450, KOSPI jumps 0.3% to near 6,585, while Hang Seng declines 0.3% to near 25,230.
Fed focus stays on inflation as TD sees modest NFP rebound
According to TD Securities, August payrolls are expected to show a modest recovery, with "August NFP likely rebounded to 95k after declining 23k in July." The bank also looks for labour market conditions to remain broadly steady, noting that "we expect the UE rate to hold at 4.1%, with balanced risks." In their view, even a stronger-than-expected print would not materially alter the policy outlook: TD argues that "a hawkish employment report will reaffirm the Fed's attention on inflation, but it will be unlikely to push the Committee towards hikes."
Meanwhile, New York Fed Bank President John Williams said on Wednesday that there is evidence “inflation continues to ease as the impact of tariffs fades”, but warned that higher energy prices have yet to spill over into other services.
Ahead of the US NFP data, ADP Employment Change data for August has come in weaker than anticipated. The US ADP reported that private employers hired 38K fresh jobs in August, fewer than 47K estimates and the prior release of 46K.
On the geopolitical front, fears of further military aggression between the US and Iran have diminished, following remarks from President Donald Trump that he doesn’t expect the renewed fighting to last “too long”, Reuters reported.
This has led to slight selling pressure in oil prices, with WTI struggling to move beyond $90.00.
Asian stocks FAQs
Asia contributes around 70% of global economic growth and hosts several key stock market indices. Among the region’s developed economies, the Japanese Nikkei – which represents 225 companies on the Tokyo stock exchange – and the South Korean Kospi stand out. China has three important indices: the Hong Kong Hang Seng, the Shanghai Composite and the Shenzhen Composite. As a big emerging economy, Indian equities are also catching the attention of investors, who increasingly invest in companies in the Sensex and Nifty indices.
Asia’s main economies are different, and each has specific sectors to pay attention to. Technology companies dominate in indices in Japan, South Korea, and increasingly, China. Financial services are leading stock markets such as Hong Kong or Singapore, considered key hubs for the sector. Manufacturing is also big in China and Japan, with a strong focus on automobile production or electronics. The growing middle class in countries like China and India is also giving more and more prominence to companies focused on retail and e-commerce.
Many different factors drive Asian stock market indices, but the main factor behind their performance is the aggregate results of the component companies revealed in their quarterly and annual earnings reports. The economic fundamentals of each country, as well as their central bank decisions or their government’s fiscal policies, are also important factors. More broadly, political stability, technological progress or the rule of law can also impact equity markets. The performance of US equity indices is also a factor as, more often than not, Asian markets take the lead from Wall Street stocks overnight. Finally, the broader risk sentiment in markets also plays a role as equities are considered a risky investment compared to other investment options such as fixed-income securities.
Investing in equities is risky by itself, but investing in Asian stocks comes along with region-specific risks to be taken into account. Asian countries have a wide range of political systems, from full democracies to dictatorships, so their political stability, transparency, rule of law or corporate governance requirements may diverge considerably. Geopolitical events such as trade disputes or territorial conflicts can lead to volatility in stock markets, as can natural disasters. Moreover, currency fluctuations can also have an impact on the valuation of Asian stock markets. This is particularly true in export-oriented economies, which tend to suffer from a stronger currency and benefit from a weaker one as their products become cheaper abroad.
