Asia stocks slip on tech retreat as China bucks the trend

Asian equities started the week on a cautious note Monday, with profit-taking hitting Japanese technology shares, while Chinese markets held firm amid optimism over domestic AI developments.

Trading volumes were light with U.S. markets closed for a holiday. Futures pointed to modest gains in Wall Street and European shares after last Friday’s retreat, with S&P 500 and Nasdaq futures both up 0.1%, EUROSTOXX 50 futures adding 0.1%, and FTSE futures flat.

U.S. data and Fed outlook

Investors are bracing for a packed week of U.S. economic data, including manufacturing, services, and Friday’s nonfarm payrolls. Median forecasts point to a 75,000 jobs gain in August, though estimates vary widely due to July’s weaker-than-expected report. The unemployment rate is expected to edge up to 4.3%.

Analysts warn the August payrolls report has often undershot expectations in recent years. A soft result would likely cement bets that the Federal Reserve will cut rates at its September 17 meeting, with futures pricing in nearly a 90% chance.

Michael Feroli, chief U.S. economist at JPMorgan, noted that while inflation and growth data do not necessarily justify an immediate cut, “it would likely take a significant positive employment surprise to stop the Fed from moving forward.”

Rate-cut expectations have underpinned Wall Street near record highs, though September is historically the S&P 500’s weakest month.

Asia-Pacific markets

Japan’s Nikkei dropped 2.0%, dragged lower by a 9% slump in chipmaker Advantest after a sharp rally in recent months. South Korea’s benchmark lost 0.7%. MSCI’s broadest index of Asia-Pacific shares outside Japan eased 0.1% after touching a four-year high last week.

China, however, continued to attract buyers. Blue chips gained 0.2%, extending August’s 10% surge as domestic liquidity supported equities. The private Caixin/RatingDog manufacturing PMI rose to 50.5 in August from 49.5, beating the official survey.

Alibaba’s Hong Kong-listed shares soared nearly 19%, their biggest jump since early 2022, fueled by optimism over its cloud division and reports that AI firm DeepSeek is using Huawei chips for model training.

Tariff and trade risks

Uncertainty over U.S. tariff policy lingered after a Court of Appeals ruled many of President Donald Trump’s levies illegal but allowed them to remain in effect until mid-October pending a Supreme Court review.

Economists warned that if the ruling stands, Washington may have to refund close to $100 billion in customs duties collected in recent months, while ongoing trade talks with Japan and South Korea risk being derailed.

Political pressure on the Federal Reserve also weighed on sentiment. Fed Governor Lisa Cook is set to file fresh arguments against her dismissal on Tuesday, while Stephen Miran, Trump’s nominee for another Fed seat, faces a confirmation hearing Thursday.

Currencies and commodities

The dollar stayed under pressure, pinned at 97.791 after a 2.2% drop last month. The euro edged up 0.3% to $1.1710, while the dollar held at 146.93 yen.

Gold benefited from the weaker dollar and dovish rate outlook, climbing 0.8% to $3,477 an ounce after a 2.2% gain last week, marking a four-month high.

Oil prices slipped as traders looked ahead to an OPEC+ output hike in the coming months. Brent crude fell 0.4% to $67.21 a barrel, while U.S. crude eased 0.4% to $63.78.