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Asian Markets Drift as Investors Assess Fed Outlook

A pedestrian walks past a stock indicator displaying the Nikkei 225 of the Tokyo Stock Exchange (C, top) and other world stock markets in Tokyo on 16 August 2021. AFP
A pedestrian walks past a stock indicator displaying the Nikkei 225 of the Tokyo Stock Exchange (C, top) and other world stock markets in Tokyo on 16 August 2021. AFP
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Asian Markets Drift as Investors Assess Fed Outlook

A pedestrian walks past a stock indicator displaying the Nikkei 225 of the Tokyo Stock Exchange (C, top) and other world stock markets in Tokyo on 16 August 2021. AFP
A pedestrian walks past a stock indicator displaying the Nikkei 225 of the Tokyo Stock Exchange (C, top) and other world stock markets in Tokyo on 16 August 2021. AFP

Stocks swung in Asia on Friday as investors tried to assess the Federal Reserve's plans for lifting interest rates to fight inflation, with mixed data and differing opinions by bank officials providing little clarity.

The rally across markets from their June lows appears to have run out of steam this week after minutes from the Fed's most recent meeting showed it was determined to keep lifting borrowing costs until prices were brought under control, AFP said.

The gains have come in the face of a number of problems that have caused unease on trading floors, including China-US tensions, the Ukraine war, supply chain snarls and extreme weather across much of the northern hemisphere.

A statement by policymakers and comments from Fed boss Jerome Powell after last month's board meeting suggested they could be considering slowing the pace of rate hikes as the economy slows.

That was followed by a drop in inflation, which lifted markets, but was followed by several officials reasserting the need to continue to tighten monetary policy to get inflation down from four-decade highs.

This week's minutes and comments from a number of Fed top brass reinforced that view, with some pouring cold water on hopes for possible rate cuts in the new year.

All eyes are now on next week's central bankers symposium in Jackson Hole, Wyoming, where finance chiefs and central bankers will speak with all attention on the utterances of Powell.

"We don't see how the Fed can pivot when they haven't achieved anything pretty much," said Marco Pirondini, of Amundi US. "The market will have to become more realistic on this."

Still, Wall Street's three main indexes edged up after Wednesday's losses.

But Asian traders moved a little more cautiously.

Tokyo, Hong Kong, Sydney, Taipei, Manila and Jakarta rose but Shanghai, Singapore, Seoul and Wellington were down.

The prospect of tighter US monetary policy for an extended period lifted the dollar back up to multi-year highs against its peers.

And OANDA's Edward Moya warned that markets would remain wobbly for a while.

"Stocks will most likely struggle for direction for the rest of the summer as Wall Street is still uncertain with how aggressive the Fed will be in September," he said in a note.

"Traders however will continue to pay close attention to developments with the war in Ukraine.

"Turkish President (Recep Tayyip) Erdogan noted that he discussed ways on ending the war with (Ukrainian) President (Volodymyr) Zelensky. An imminent end to the war seems unlikely, but any de-escalations or improved passages for Ukraine grain exports would be welcome news for risk appetite.

However, others remained optimistic that the recent gains could be maintained.

Lewis Grant, of Federated Hermes, added: "We remain optimistic that the current rally will build into a longer term bull market, but cognisant that geopolitical risks remain elevated and it is too early to dismiss the possibility that we are witnessing a bear market rally.

"Investor risk appetite remains fragile."

- Key figures at around 0230 GMT -
Tokyo - Nikkei 225: UP 0.1 percent at 28,967.64 (break)

Hong Kong - Hang Seng Index: UP 0.4 percent at 19,834.61

Shanghai - Composite: DOWN 0.1 percent at 3,273.79

Euro/dollar: DOWN at $1.0078 from $1.0095 Thursday

Pound/dollar: DOWN at $1.1917 from $1.1937

Euro/pound: DOWN at 84.54 pence from 84.56 pence

Dollar/yen: UP at 136.16 yen from 135.88 yen

West Texas Intermediate: DOWN 0.2 percent at $90.34 per barrel

Brent North Sea crude: DOWN 0.2 percent at $96.40 per barrel

New York - Dow: UP 0.1 percent at 33,999.04 (close)

London - FTSE 100: UP 0.4 percent at 7,541.85 (close)

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Business

IMF and Arab Monetary Fund Sign MoU to Enhance Cooperation

The MoU was signed by IMF Managing Director Dr. Kristalina Georgieva and AMF Director General Dr. Fahad Alturki - SPA
The MoU was signed by IMF Managing Director Dr. Kristalina Georgieva and AMF Director General Dr. Fahad Alturki - SPA
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IMF and Arab Monetary Fund Sign MoU to Enhance Cooperation

The MoU was signed by IMF Managing Director Dr. Kristalina Georgieva and AMF Director General Dr. Fahad Alturki - SPA
The MoU was signed by IMF Managing Director Dr. Kristalina Georgieva and AMF Director General Dr. Fahad Alturki - SPA

The International Monetary Fund (IMF) and the Arab Monetary Fund (AMF) signed a memorandum of understanding (MoU) on the sidelines of the AlUla Conference on Emerging Market Economies (EME) to enhance cooperation between the two institutions.

The MoU was signed by IMF Managing Director Dr. Kristalina Georgieva and AMF Director General Dr. Fahad Alturki, SPA reported.

The agreement aims to strengthen coordination in economic and financial policy areas, including surveillance and lending activities, data and analytical exchange, capacity building, and the provision of technical assistance, in support of regional financial and economic stability.

Both sides affirmed that the MoU represents an important step toward deepening their strategic partnership and strengthening the regional financial safety net, serving member countries and enhancing their ability to address economic challenges.

Business

Saudi Chambers Federation Announces First Saudi-Kuwaiti Business Council

File photo of the Saudi flag/AAWSAT
File photo of the Saudi flag/AAWSAT
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Saudi Chambers Federation Announces First Saudi-Kuwaiti Business Council

File photo of the Saudi flag/AAWSAT
File photo of the Saudi flag/AAWSAT

The Federation of Saudi Chambers announced the formation of the first joint Saudi-Kuwaiti Business Council for its inaugural term (1447–1451 AH) and the election of Salman bin Hassan Al-Oqayel as its chairman.

Al-Oqayel said the council’s formation marks a pivotal milestone in economic relations between Saudi Arabia and Kuwait, reflecting a practical approach to enabling the business sectors in both countries to capitalize on promising investment opportunities and strengthen bilateral trade and investment partnerships, SPA reported.

He noted that trade between Saudi Arabia and Kuwait reached approximately SAR9.5 billion by the end of November 2025, including SAR8 billion in Saudi exports and SAR1.5 billion in Kuwaiti imports.

Business

Leading Harvard Trade Economist Says Saudi Arabia Holds Key to Success in Fragmented Global Economy

Professor Pol Antràs speaks during a panel discussion at the AlUla Conference for Emerging Market Economies (Asharq Al-Awsat).
Professor Pol Antràs speaks during a panel discussion at the AlUla Conference for Emerging Market Economies (Asharq Al-Awsat).
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Leading Harvard Trade Economist Says Saudi Arabia Holds Key to Success in Fragmented Global Economy

Professor Pol Antràs speaks during a panel discussion at the AlUla Conference for Emerging Market Economies (Asharq Al-Awsat).
Professor Pol Antràs speaks during a panel discussion at the AlUla Conference for Emerging Market Economies (Asharq Al-Awsat).

Harvard University economics professor Pol Antràs said Saudi Arabia represents an exceptional model in the shifting global trade landscape, differing fundamentally from traditional emerging-market frameworks. He also stressed that globalization has not ended but has instead re-formed into what he describes as fragmented integration.

Speaking to Asharq Al-Awsat on the sidelines of the AlUla Conference for Emerging Market Economies, Antràs said Saudi Arabia’s Vision-driven structural reforms position the Kingdom to benefit from the ongoing phase of fragmented integration, adding that the country’s strategic focus on logistics transformation and artificial intelligence constitutes a key engine for sustainable growth that extends beyond the volatility of global crises.

Antràs, the Robert G. Ory Professor of Economics at Harvard University, is one of the leading contemporary theorists of international trade. His research, which reshaped understanding of global value chains, focuses on how firms organize cross-border production and how regulation and technological change influence global trade flows and corporate decision-making.

He said conventional classifications of economies often obscure important structural differences, noting that the term emerging markets groups together countries with widely divergent industrial bases. Economies that depend heavily on manufacturing exports rely critically on market access and trade integration and therefore face stronger competitive pressures from Chinese exports that are increasingly shifting toward alternative markets.

Saudi Arabia, by contrast, exports extensively while facing limited direct competition from China in its primary export commodity, a situation that creates a strategic opportunity. The current environment allows the Kingdom to obtain imports from China at lower cost and access a broader range of goods that previously flowed largely toward the United States market.

Addressing how emerging economies should respond to dumping pressures and rising competition, Antràs said countries should minimize protectionist tendencies and instead position themselves as committed participants in the multilateral trading system, allowing foreign producers to access domestic markets while encouraging domestic firms to expand internationally.

He noted that although Chinese dumping presents concerns for countries with manufacturing sectors that compete directly with Chinese production, the risk is lower for Saudi Arabia because it does not maintain a large manufacturing base that overlaps directly with Chinese exports. Lower-cost imports could benefit Saudi consumers, while targeted policy tools such as credit programs, subsidies, and support for firms seeking to redesign and upgrade business models represent more effective responses than broad protectionist measures.

Globalization has not ended

Antràs said globalization continues but through more complex structures, with trade agreements increasingly negotiated through diverse arrangements rather than relying primarily on multilateral negotiations. Trade deals will continue to be concluded, but they are likely to become more complex, with uncertainty remaining a defining feature of the global trading environment.

Interest rates and artificial intelligence

According to Antràs, high global interest rates, combined with the additional risk premiums faced by emerging markets, are constraining investment, particularly in sectors that require export financing, capital expenditure, and continuous quality upgrading.

However, he noted that elevated interest rates partly reflect expectations of stronger long-term growth driven by artificial intelligence and broader technological transformation.

He also said if those growth expectations materialize, productivity gains could enable small and medium-sized enterprises to forecast demand more accurately and identify previously untapped markets, partially offsetting the negative effects of higher borrowing costs.

Employment concerns and the role of government

The Harvard professor warned that labor markets face a dual challenge stemming from intensified Chinese export competition and accelerating job automation driven by artificial intelligence, developments that could lead to significant disruptions, particularly among younger workers. He said governments must adopt proactive strategies requiring substantial fiscal resources to mitigate near-term labor-market shocks.

According to Antràs, productivity growth remains the central condition for success: if new technologies deliver the anticipated productivity gains, governments will gain the fiscal space needed to compensate affected groups and retrain the workforce, achieving a balance between addressing short-term disruptions and investing in long-term strategic gains.