Caution dominated in financial markets on Monday after a difficult but in the end strong August and with the prospect of a potentially seasonally challenging September. Asia-Pacific stock markets traded mostly lower on Tuesday after inflation in South Korea hit a 42-month low. Investors are now looking ahead to Friday's US employment report, which could provide clues for the Fed's monetary policy.
In the Asia-Pacific region, most equity markets traded lower after headline inflation in South Korea eased from 2.6% to 2% in August - the lowest year-on-year rate since March 2021 and the South Korean Kospi fell 0.5%. In Tokyo, the Nikkei 225 was 0.1% lower, while Australia's S&P/ASX 200 fell 0.1%. Hong Kong's Hang Seng Index lost 0.6% and the Shanghai Composite fell 0.5%.
Wall Street was closed yesterday for a public holiday. Once again, all eyes will be on the US government's employment report for August, due on Friday, as the first major economic report of the month. Wall Street will also face seasonal headwinds as September has been the worst month for the S&P 500 on average over the last decade.
In Europe, markets were less dynamic at the beginning of the week. After a turbulent August, there was a lack of impetus from the closed US markets on Monday and the results of the two state elections in Eastern Germany did not seem to have a major impact on markets. The AfD's victory in Thuringia and its second place in Saxony put a damper on federal politics. However, this is unlikely to have an immediate impact on federal politics, as other parties have rejected coalitions. Germany's leading index, the Dax, ended the day up 0.1%. The EuroStoxx 50 was up 0.3% at the close of trading. The euro was firmer against the US dollar and the Swiss franc, bouncing back from last week. This was likely due to a slight adjustment in interest rate expectations following the release of economic data. The Purchasing Managers' Manufacturing Index for the euro area came in below 50 points (45.6), still pointing to a slowdown in industry, but better than expected.
The Swiss markets also remained quiet. There was no major profit-taking after last Friday's annual high, and there was also a lack of impetus from the US. After a weaker opening, the Swiss Market Index (SMI) ended the day in the green, up 0.1% at 12,451.48, just below its annual high.
Corporate news in focus: dormakaba, Partners Group, Swiss Life.
Economic data in focus: Swiss consumer price index and gross domestic product, ISM manufacturing PMI USA.
Global economic and market trends at a glance
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Editor: Alessandro Fezzi
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Definition of rating categories of S&P and Moody’s which are relevant for us:
AAA/Aaa: Borrower with highest credit quality. Default risk also virtually negligible over the longer term
AA/Aa: Safe investment, default risk virtually negligible but more difficult to assess in the longer term
A: Safe investment as long as no unforeseen events impair the overall economy or sector
BBB/Baa: Average investment. However, problems must be expected if the overall economy deteriorates
BB/Ba: Speculative investment. Defaults must be expected if the economic situation deteriorates
B: Highly speculative investment. Defaults are likely if the economic situation deteriorates
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