A wave of risk aversion swept through global markets as September, historically a volatile month for equities, began with fresh concerns over the health of the US economy. A closely monitored US manufacturing index once again fell short of expectations, intensifying fears of a potential economic slowdown in the world’s largest economy. This development compounded already fragile market sentiment in Asia, where a series of disappointing economic data from China has been weighing heavily on risk assets.
The dollar gauge, which had enjoyed a five-day rally—its longest since April—finally lost steam, reversing course as the risk-off mood took hold. The yen, often seen as a safe-haven currency during periods of market turbulence, climbed higher amid the growing uncertainty. Meanwhile, oil prices continued their downward trajectory, pressured by nearly a 5% drop on Tuesday as concerns over weak demand and oversupply persisted.
The early August selloff in equities, initially feared to be the beginning of a prolonged downturn, proved instead to be a temporary pause in the broader bull market. The market quickly rebounded as expectations for a US interest rate cut gained traction, effectively erasing earlier losses. This recovery was further bolstered by dovish remarks from Federal Reserve Chair Jerome Powell at the Jackson Hole symposium, where he signaled a cautious approach to monetary policy amid evolving economic conditions.
Investor attention is now turning to the upcoming US jobs report, a critical economic indicator that could shape market expectations for the Fed’s next move. The report, due later this week, is expected to show that payrolls in the US increased by approximately 165,000, according to median estimates. The outcome of this report will be closely watched, as it could either reinforce or challenge the current narrative surrounding the Federal Reserve’s policy direction, with significant implications for both currency and equity markets.