Global Markets Stumble as Rate-Cut Hopes Fade; Asia Policy Shifts in Focus
Key Takeaways
A bruising day for risk assets sent U.S. stocks sharply lower, while shifting policy signals across Asia sharpened investors’ focus on growth, currency management, and energy demand tied to artificial intelligence. The market narrative turned defensive as hopes for rapid interest-rate cuts cooled and tech leadership wobbled.
Wall Street closed deeply in the red, with the Dow dropping roughly 800 points and the Nasdaq and S&P 500 under pressure as rate-cut expectations were pared back. A slide in Nvidia intensified concerns about the durability of the AI trade, prompting a broader rotation out of growth-sensitive names. In Japan, Prime Minister Sanae Takaichi said it is premature to set a numerical minimum-wage target, arguing instead for conditions that allow companies to raise pay above inflation organically—an approach that follows pushback from regional businesses wary of mandated increases.
China remained a central theme for global investors. Market estimates pointed to a USD/CNY reference rate near 7.0964 as Beijing continues to manage currency stability. UBS noted China’s AI-related power build-out at 5–6 GW—far smaller than the estimated 40–45 GW in the U.S.—suggesting a more measured trajectory and reducing bubble fears. The bank raised its outlook for China’s power demand, expecting AI to accelerate energy investment. Separately, Beijing moved to attract private capital into infrastructure by lifting ownership caps, a shift underscored by a 10% decline in foreign direct investment. In commodities, gold rebounded to around $4,260 amid renewed ETF demand, with upside risk flagged by major banks and trading volumes topping $208 billion. On the corporate front, Evergrande Property Services invited updated bids as its liquidation process advances, highlighting ongoing uncertainty around asset recoveries tied to the broader collapse.
Key Points – U.S. stocks sank, with the Dow off about 800 points as rate-cut bets eased and Nvidia weighed on tech sentiment. – Japan signaled caution on wage policy, favoring market-driven pay increases over a strict minimum-wage target. – China’s AI power expansion is estimated at 5–6 GW versus 40–45 GW in the U.S., pointing to a steadier build-out. – The PBOC was expected to set the USD/CNY fix near 7.0964, underscoring managed currency dynamics. – Beijing opened more infrastructure projects to private capital as FDI fell 10%, aiming to bolster investment. – Gold rallied to roughly $4,260 on ETF demand, while the Evergrande liquidation advanced with new bid invitations.
