Asia equities lower ahead of Powell speech

Markets eye Powell Speech at Jackson Hole

Asian markets are trading quietly today, with regional investors ignoring Wall Street overnight. Local markets are mostly edging lower as investors reduce positioning ahead of Chairman Powell’s Jackson Hole address this evening.

The Nikkei 225 is modestly lower by 0.40%, with South Korea’s Kospi 0.55% lower. China’s Shanghai Composite and CSI 300 have eased by 0.30%, with the Hang Seng dropping 1.05% as IPO fever abates ahead of Powell’s address.

Regional markets are mixed with Bangkok edging higher, but Singapore, Kuala Lumpur and Jakarta all slightly lower as positioning is adjusted. Australian markets are following Wall Street though, the ASX 200 rising 0.30%, and the All Ordinaries increasing 0.40%.

We expect the directionless trading to continue throughout the day and into Europe, with equity markets content to book some profits, rather than second guess the Federal Reserve Chairman. Assuming no surprises emerge, the underlying drivers of the longer-term bull market remain as firm as ever, though.

Market attention will be focused on US numbers this evening and the Fed Chair Powell’s Jackson Hole speech at 2110SGT. On the fundamental front, US GDP is expected to plunge by a staggering 32.50% in Q2 QoQ. However, it is a known unknown, as the US economy was savaged by Covid-19 lockdowns, both domestically and internationally. The world has quickly moved on since then and the GDP data is unlikely to shake up the markets. The markets will be much more interested in the weekly Initial and Continuing Weekly Jobless Claims. With no progress in the US Congress on a stimulus package, Initial Claims are expected to remain around the 1-million level, while Continuing Claims are expected to stay anchored around 14.5 million. Neither figure is something for the US government to be proud of, and the potential for a negative surprise from both indicators is perhaps higher than usual.

Any fallout from the unemployment reports is going to be short-lived, though, as Mr Powell’s speech follows shortly after the release.

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