China Trade Disruptions May Shake Market Stability, According to Reuters

By Jamie McGeever

A look at the upcoming dynamics in Asian markets reveals a marked shift from the volatility experienced in global markets last week to a calmer atmosphere this week. Traders in Asia are entering Tuesday’s session looking to recover from recent losses before determining their next steps.

On Monday, there was a notable rebound in risk appetite and a decrease in volatility. However, U.S. interest rate futures continue to reflect expectations of nearly 250 basis points in rate cuts by the end of next year, indicating ongoing concerns about the growth outlook. As key U.S. inflation figures are scheduled for release on Wednesday, investors might remain cautious in their trading strategies over the next day and a half, potentially paying closer attention to local factors in Asian markets.

This week’s economic data releases will include Malaysian industrial output, Indonesian retail sales, and consumer sentiment and business confidence from Australia. Additionally, the Japanese yen’s recent upward movement seems to have stalled, with a potential decline below 143.00 against the dollar imminent.

One of the most significant market influences on Tuesday could be the release of China’s trade data for August, which has been set against low expectations. Data suggests that exports are likely to show a year-on-year increase of 6.5% by value, a decrease from July’s 7.0% growth and the slowest pace in four months. Similarly, imports are anticipated to have expanded by only 2%, down sharply from 7.2% in July.

The concerns surrounding diminishing export activity due to increasing trade barriers and tariffs are troubling enough, but the lackluster growth in imports also points to weak domestic demand in China. Together, these trends raise red flags about the country’s economic resilience and capacity for sustainable growth.

Adding to the economic concerns is the persistent issue of deflation. Recent figures revealed a rise in consumer inflation for August, reaching the fastest pace in six months, primarily driven by higher food prices attributed to weather disruptions. However, this annual rate of 0.6% still fell short of market forecasts.

More troubling is the intensified producer price deflation. In August, the producer price index dropped 1.8% year-on-year, marking the most significant decline in four months and worsening from July’s 0.8% drop, while also missing economists’ consensus prediction of a 1.4% decrease. With factory gate prices in continuous deflation for two years, it is unlikely that consumer inflation will see substantial increases in the near future.

In Taiwan, TSMC, the world’s leading contract chipmaker, is set to publish its sales figures for August. Following June sales of T$207.87 billion and July’s increase to T$256.95 billion, market attention will be on how these numbers evolve.

TSMC serves as a vital supplier for major companies, including Apple and Nvidia. This relationship has been instrumental in propelling Taiwan’s exports to an all-time monthly record of nearly $44 billion in August, driven by rising demand for chips in the AI sector even as demand from China remains sluggish.

Key developments to watch for direction in Asian markets on Tuesday include:

• China trade data (August)
• TSMC sales figures (August)
• Australia consumer confidence (September)