Recoups early losses as S&P500 revives on moderate DXY, oil stabilizes

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  • Asian indices rallied significantly amid weaker DXY.
  • China’s manufacturing activities unexpectedly intensified in August.
  • Oil prices should show a reversal as the period of correction seems to be over.

Markets in the Asian realm recouped the majority of their losses as overnight S&P500 futures turned positive after a third straight decline on Tuesday. Asian stocks are also reacting to their respective economic data as Japanese retail data and Chinese PMI were released. Additionally, the US Dollar Index (DXY) is showing a subdued performance ahead of data on the shift in Automatic Data Processing (ADP) employment in the US.

At press time, Japan’s Nikkei225 was down 0.52%, Hang Seng was down 0.46%, however, China A50 added 0.26%. Indian indices are closed because of Ganesh Chaturthi.

After opening lower, Japanese stocks recouped the majority of their losses amid upbeat retail data. Retail trade data improved to 2.4%, better than expectations of 1.9% and the previous release of 1.5% on an annual basis. Additionally, monthly economic data advanced 0.8%. Meanwhile, the Industrial Production data landed higher at 1.8% than expected and the old version of -2.6% and -2.8% respectively.

Meanwhile, China, the world’s second-largest economy, is trading positively after firmer official manufacturing data. China’s NBS manufacturing PMI landed at 49.4, above estimates of 49.2 and the previous release of 49.0. Additionally, the non-manufacturing data was released higher to 52.6 from the consensus of 52.2, but remained higher than the previous release of 53.8.

Losses in U.S. tech stocks on Tuesday forced Wall Street to a third straight decline. According to the consensus, the US ADP should report job creations of 200,000, compared to 528,000 job creations reported in July. Investors believe that a halt in the recruitment process by various tech giants is responsible for a drop in the forecast for additional jobs. Also, it indicates a slowdown in the US economy.

On the oil front, oil prices corrected to near $92.00 after a firmer rally. While demand is expected to remain weak in the face of the consequences of the restrictive monetary policy of Western central banks, investors are focusing more on the production cuts announced by OPEC to correct the price imbalance. Oil prices are expected to rebound strongly.

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