The global chip sector is currently receiving more attention than major central banks due to concerns raised by the world’s top contract chipmaker regarding demand. This has resulted in a decline in share prices of semiconductor stocks. According to a report by RushHourDaily, TSMC (2330.TW) has requested its major vendors to delay deliveries, which has created doubts about demand and negatively impacted sentiment in Asia. This comes after Wall Street’s poor performance last week.
There is also a new concern about chip demand from automakers due to simultaneous strikes at factories of Detroit firms General Motors (GM.N), Ford (F.N), and Chrysler parent Stellantis (STLAM.MI), which have now entered day four.
Japan’s Respect for the Aged holiday has provided some stability in Asian markets, and there are signs of stability in Chinese markets as well. However, troubled Chinese trust firm Zhongrong International Trust Co’s inability to make timely payments on some trust products indicates that the property sector remains a significant source of stress.
The highlight of the week in Asia is the Bank of Japan’s policy meeting on Friday, following speculation of a potential shift away from ultra-loose policy. Additionally, central bank meetings are scheduled for the U.S. Federal Reserve on Wednesday and the Bank of England on Thursday.
After the European Central Bank’s recent actions, the euro will be closely monitored as an indicator of whether the more hawkish members’ backlash is gaining traction with traders and investors.
The Bank of England is expected to raise interest rates for the 15th time later in the week, while the Fed is likely to maintain a hawkish pause. The Fed futures indicate that the overnight lending rate will remain above 5% through late July 2024, suggesting that the Fed will not deviate from its message of higher rates for a longer period.
Amidst these developments, the dollar continues to strengthen due to its growth and yield advantages.
Another complication is the steady increase in oil prices, which is fueling concerns about inflation just as central banks in most developed economies are nearing the end of their tightening cycles. This has led to rising fears of stagflation.
Key developments that could impact markets on Monday include speeches by ECB’s de Guindos and Panetta, UK September house prices, and U.S. September Fed services business activity and NAHB housing index.
In conclusion, the global chip sector’s concerns over demand and strikes at automaker factories are overshadowing major central banks. The Bank of Japan’s policy meeting, along with central bank meetings in the U.S. and the UK, will be closely watched. The euro’s performance will indicate the impact of the more hawkish ECB members. The Bank of England is expected to raise interest rates, while the Fed is likely to maintain a hawkish pause. The dollar remains strong, and rising oil prices are raising inflation concerns. Key developments on Monday include speeches by ECB officials, UK house prices, and U.S. Fed services business activity and housing index.
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