SINGAPORE — Stocks were muted, the dollar steadied near five-week lows and gold climbed to record highs on Tuesday, as investors awaited economic data this week that could reinforce expectations for a Federal Reserve rate cut in September.
Markets widely expect the Fed to lower interest rates later this month, pricing in an 89 percent chance of a 25 basis point cut, but data this week will help investors gauge whether the central bank could perhaps lean toward a jumbo cut.
The focus will be on Friday’s US nonfarm payrolls report, which will be preceded by data on job openings and private payrolls, providing investors and the Fed a clearer picture of the labour market that has become the centre of policy debate.
“While an outsized 50 bps cut in September is not the base case expectation currently, it cannot be ruled out altogether if the August jobs data shows exceptional weakness,” said Vasu Menon, managing director of investment strategy at OCBC Bank.
The US inflation report for August, scheduled to be released on September 11, a week before the Fed’s policy meeting, will play a crucial role in determining the central bank’s next steps.
The prospect of lower borrowing costs has kept Wall Street near record highs, while stocks in other regions have also gained in recent weeks. On Tuesday, MSCI’s broadest index of Asia-Pacific shares outside Japan was flat.
Nasdaq futures NQc1 fell 0.1 percent while European futures STXEc1 eased 0.07 percent. US markets were closed on Monday for a holiday leaving few cues for Asian markets.
“It is all about gauging whether the Fed remains ahead of a possible slowdown in the US economy, or if it’s behind the curve,” said Kyle Rodda, a senior financial market analyst at Capital.com in Melbourne.
“If it seems like the US economy is accelerating off the cliff, it’s going to raise fears that the Fed has been too slow to cut rates. If the deterioration is modest, it will support the case for rate cuts while also easing fears of a rapid deterioration in economic activity.”
China stocks have been on a tear recently buoyed by AI enthusiasm but fell on Tuesday as investors locked in profits following the sharp rally.
The blue-chip CSI300 index fell 0.9 percent after hitting a three-year high for the third straight session earlier on Tuesday. Hong Kong’s Hang Seng index eased 0.6 percent after surging 2 percent on Monday.
In currencies, the dollar clawed back some of its losses ahead of the European open. The euro fell 0.16 percent at $1.16925, while sterling was at $1.35264, down 0.17 percent.
