Asia Shares Slip, but US and EU Futures Find a Bid

Asian Markets Struggle Amid Growth Concerns

Asian equity markets opened the week under pressure as concerns surrounding U.S. and Chinese economic growth weighed heavily on investor sentiment. The impact was particularly felt in China, where newly released Consumer Price Index (CPI) data highlighted continued deflationary trends. Producer prices fell by 1.8% year-over-year in August, surpassing expectations of a 1.4% drop, while CPI rose by only 0.6%, primarily due to food price increases. This weak demand environment pushed Chinese blue-chip stocks down by 1%, hitting their lowest point in seven months after a 2.7% decline the previous week. Meanwhile, Japan’s Nikkei index suffered further losses, declining by 0.8% on top of last week’s 6% slump, driven by a sell-off in technology stocks. The MSCI index of Asia-Pacific shares, excluding Japan, dropped 1.2%, following a 2.25% fall last week, and South Korea’s market slipped by 0.2%.

U.S. and European Futures Show Resilience

While Asian markets struggled, U.S. and European stock futures showed signs of recovery. S&P 500 futures rallied by 0.4%, and Nasdaq futures gained 0.6%, rebounding from Friday’s downturn. In Europe, EUROSTOXX 50 futures increased by 0.5%, while FTSE futures strengthened by 0.6%, indicating a more positive start to the week.

Federal Reserve Rate Cut Speculation

Investor sentiment remains cautious ahead of the Federal Reserve’s next policy meeting. Mixed data from the U.S. August payroll report has sparked debate over the potential for a significant rate cut. Fed fund futures currently indicate a 30% chance of a 50 basis point cut, influenced by recent comments from Fed Governor Christopher Waller and New York Fed President John Williams. However, as Barclays economist Christian Keller remarked, “While the labor market is cooling, there’s no indication of the rapid decline necessary to justify a 50 basis point rate cut. We anticipate the Fed will start with a 25 basis point reduction, followed by two more such cuts later this year.” Despite this caution, markets are pricing in 113 basis points of rate cuts by the end of 2024, with an additional 132 basis points forecast for 2025. Wednesday’s release of U.S. CPI data for August is expected to further support the case for a cut, with headline inflation projected to ease to 2.6% from 2.9%.

ECB Poised for Policy Easing

Across the Atlantic, attention is focused on the European Central Bank (ECB), which is widely expected to implement a quarter-point rate cut during its policy meeting on Thursday. However, uncertainty remains about whether further cuts will follow in October and December. Analysts at TD Securities highlighted the conflicting pressures facing the ECB: “Strong wage growth and service-sector inflation are strengthening the case for hawkish action, while slowing growth data supports the doves. A series of gradual cuts appears more in line with the ECB’s current economic projections.”

Bond Yields and Currency Movements

Global bond markets rallied on the prospect of monetary policy easing, with U.S. Treasury yields hitting their lowest levels in 15 months. However, profit-taking on Monday led to a slight uptick, with two-year yields rising to 3.704% and 10-year yields reaching 3.748%. On the currency front, the U.S. dollar strengthened by 0.6% against the yen, while the euro remained stable at $1.1076, retreating from Friday’s peak of $1.1155.

Oil Prices Find Support

In commodity markets, oil prices saw a rebound as a potential hurricane system approached the U.S. Gulf Coast. Brent crude increased by $0.88 to $71.93 per barrel, while U.S. crude climbed by $0.91 to trade at $68.58 per barrel. This comes after oil prices suffered their largest weekly decline in 11 months amid ongoing concerns about global demand.

Natural Gas and Oil Forecast: WTI Eyes $70 Resistance as Demand Concerns Linger

Market Overview

WTI crude oil futures have rebounded to $68.7 per barrel after last week’s sharp 8% drop, driven by concerns over weakening labor data in the U.S. and Europe, signaling potential energy demand slowdown. Additionally, softer Chinese consumption and the possibility of an agreement to resume oil production in Libya have added further pressure. Bank of America has revised its 2025 oil forecast, lowering Brent crude to $75 per barrel and the U.S. benchmark WTI to $71. These macroeconomic and geopolitical concerns are also affecting natural gas markets, where uncertainty around global demand is creating volatility for both commodities.

Natural Gas Price Forecast

Natural Gas (NG) is currently trading at $2.196, down by 2.52%. The price sits just below the critical pivot point of $2.19, which is acting as a strong support level. An upward trendline indicates continued buying pressure as long as NG remains above this mark. Immediate resistance levels lie at $2.23, followed by $2.29 and $2.35. If NG falls below $2.19, a sharper decline towards $2.16 and $2.12 could occur. The 50-day EMA at $2.21 and the 200-day EMA at $2.15 offer mixed signals, but if NG holds above $2.19, it could support a bullish outlook in the short term. Keep a close watch on these levels for potential moves.

WTI Oil Price Forecast

WTI crude oil (USOIL) is trading at $68.54, slightly below the key pivot point of $68.72. A break above this critical level could signal a shift towards a bullish outlook, with immediate resistance at $70.73, and further hurdles at $72.00 and $74.06. However, the 50-day EMA of $69.95 and the 200-day EMA of $73.03 indicate that downside pressure remains strong. On the support side, $67.23 is the first key level to watch, followed by $65.81 and $64.10. For now, oil remains in a wait-and-see mode, with a bearish bias below $68.72. Should prices break above this level, a renewed bullish momentum could emerge.

Brent Oil Price Forecast

Brent crude (UKOIL) is currently trading at $71.89, just under the crucial pivot point of $72.16. A downward channel on the 2-hour chart is reinforcing resistance near this level, keeping the price under pressure. If Brent breaks above $72.16, we could see a bullish push towards $73.48 and potentially $74.80. However, if it stays below the pivot, a bearish correction is likely, with immediate support at $70.94, and downside potential extending to $69.97 and $68.93. The 50-day EMA at $73.48 and the 200-day EMA at $76.66 suggest stronger resistance ahead, signaling a cautious, bearish stance unless Brent breaks above $72.16.

Conclusion

Both oil and natural gas markets remain in a delicate balance. WTI and Brent are facing key resistance levels that could trigger either a bullish breakout or continued bearish pressure, depending on whether prices can sustain above critical pivots. Natural gas, too, is at a crucial support level, with upward momentum contingent on maintaining key thresholds. In the near term, the markets are poised for potential movement in either direction, largely influenced by demand concerns and geopolitical developments.

Tech Bull Trend in Question Amid September Selloff: BTIG

QQQ Index at Critical Juncture

The tech-heavy QQQ index, which tracks the Nasdaq 100, is approaching a pivotal point, with the 200-day moving average (DMA) acting as a key support level. BTIG suggests that if the index can test and reclaim this level, it may signal a tactical low for the sector, providing a short-term boost. However, the analysts caution that any rebound could be short-lived if broader structural issues in the tech sector’s relative strength persist. “Beyond absolute prices, technology’s relative trend is in question, as it has broken below both its August lows and spring highs,” the analysts said. This decline reflects the sector’s underperformance compared to other segments of the market, especially as leading tech companies have struggled to maintain earlier momentum.

Divergence Among Major Tech Companies

Microsoft (NASDAQ) has shown relative weakness, testing its 200 DMA, highlighting broader concerns about the sector. In contrast, Meta (NASDAQ) has exhibited more resilience, maintaining strength near key resistance levels. This divergence indicates that the technology sector is becoming more bifurcated, with some companies holding up better than others.

Rise in Volatility and Market Sentiment Shift

BTIG analysts have also noted a shift in market sentiment, marked by the re-inversion of the VIX curve, a key volatility and fear gauge. Although the VIX is not yet at levels typically associated with a durable market bottom, the increase in volatility signals that fear is creeping back into the market. This could potentially lead to another tradable low, but BTIG stresses that the overall market environment remains fragile. While large-cap tech companies, often referred to as the “Mag 7,” have managed to hold key support levels relative to the broader S&P 500, the group is more divided than in previous periods. As structural concerns about the sector’s long-term strength linger, the technology sector’s leadership role in the market is increasingly in question.