Markets slide as traders prepare for key US data ~ EconomyLens.com

Hong Kong (AFP) – Stocks skidded Thursday as traders continue to pull back from the buying that has propelled markets to record highs in recent months, with upcoming US inflation and jobs data seen as likely to be the next catalysts for action. Investors have been on a buying spree since shares hit deep lows in the wake of Donald Trump’s April global tariff bombshell, with sentiment buoyed by trade agreements and signs that the Federal Reserve was about to resume its interest rate cut programme.

The US central bank — citing a weak labour market and inflation that has not spiked — last week announced its reduction and forecast there could be two more this year. However, while traders have been banking on a period of easing, some Fed officials, including boss Jerome Powell, are trying to take a more cautious approach, citing still-elevated inflation. His remarks this week that stocks are “fairly highly valued” and that there was “no risk-free path” on rates has tempered the euphoria on trading floors.

The bank will be keeping watch on the release this week of its preferred gauge of inflation — the personal consumption expenditure index — and next week’s non-farm payrolls report. Tokyo held solidly in positive territory early Thursday, but most other markets trended lower. Hong Kong dropped, with tech titan Alibaba in the red after Wednesday’s gain of more than nine percent in reaction to its chief executive saying it planned to ramp up spending on artificial intelligence.

Its US-listed stock piled on more than eight percent. And China’s biggest car exporter Chery Automobile rocketed more than 13 percent on its trading debut in the city, having raised about US$1.2 billion in its initial public offering. It ended up 3.8 percent. There were losses in Singapore, Wellington, Taipei, Manila, Mumbai, and Jakarta, while Sydney and Bangkok edged up with Shanghai and Seoul barely moved. London, Paris, and Frankfurt fell.

The tepid day came after a second day of losses in Wall Street for all three main indexes. While there appears to be some unease in recent days over the latest market rally, Bank of America analysts wrote, “With major regions in easy fiscal mode, and with the Fed cutting against a backdrop of broadening and accelerating profits, it’s not hard to argue for a boom in (earnings per share) and GDP growth.”

“US (capital expenditure) and revisions are broadening beyond tech. Sticky inflation could help sales and thus drive operating leverage. This is the higher probability ‘tail’ in 2026 than stagflation or recession, in our view.” And Pepperstone’s Michael Brown added that “the bull case has been a solid one for quite some time now, with the S&P having gone over 100 days without a daily loss of at least two percent, and remains firmly intact, with the underlying economy resilient and earnings growth robust.”

“Furthermore, the Fed’s ‘run it hot’ approach, resulting in a looser policy stance, sooner than expected, tilts risks to the outlook to the upside.”