Global equities started September on a cautious note as Asian stock markets diverged sharply, reflecting investor uncertainty at the intersection of weakening global growth, Federal Reserve policy expectations, and volatile technology shares. While Japan and South Korea suffered sharp declines led by chipmakers, China’s mainland indices outperformed on optimism surrounding AI development and stronger-than-expected factory activity. European stocks opened slightly higher, showing resilience ahead of a critical week dominated by U.S. economic data.

Asian Markets: Japan and Korea Weaken, China Stands Out

Asian equities delivered a mixed performance on the first trading day of September. The Nikkei 225 fell around 2%, driven primarily by weakness in semiconductor-related stocks. Advantest, a leading chip-testing equipment maker, slumped after investors rotated out of high-flying tech names that had dominated returns in recent months. Similarly, the Kospi in South Korea slipped, with major foundries and memory-chip producers seeing profit-taking as traders reassessed valuations amid concerns about slowing export growth.

In contrast, China’s onshore benchmarks and Hong Kong-listed technology giants rallied strongly. The catalyst was the release of the August manufacturing PMI, which came in at 50.5, above expectations and signaling modest expansion in factory activity. This was complemented by renewed market enthusiasm for domestically developed artificial intelligence platforms, which Beijing has promoted as a strategic growth engine. Gains in heavyweight internet and software firms helped offset broader caution in Asia, positioning China as the standout in the region.

Europe Opens Firmer Despite Global Uncertainty

As trading shifted westward, European equities opened higher, with the Stoxx Europe 600 showing mild gains in morning trade. Energy transition names and defensive consumer staples led the advance, reflecting a rotation toward stability after August’s volatility. European investors are also positioning for a data-heavy week, with particular focus on inflation trends in the eurozone and updated guidance from the European Central Bank ahead of the autumn policy cycle.

U.S. Markets Quiet in Holiday-Thinned Session

In the United States, financial markets remained subdued due to the Labor Day holiday, leaving global investors without fresh signals from Wall Street. Futures on the S&P 500 and Nasdaq 100 were little changed, suggesting a flat open when U.S. trading resumes on Tuesday. Analysts note that liquidity is thin, meaning outsized moves could occur once volumes return and traders reposition ahead of Friday’s nonfarm payrolls report.

Macro Focus: U.S. Jobs Report and Fed Policy

The dominant theme for global markets this week remains the Federal Reserve’s September 17 meeting. Investors are closely watching labor-market data, with Friday’s nonfarm payrolls likely to be the most significant release. Recent economic indicators have signaled softer hiring momentum, fueling expectations that the Fed will cut interest rates by 25 basis points. Futures markets now price a high probability of such a move, which would mark the first policy easing in over a year.

A weaker jobs report could strengthen the case for a rate cut and provide further support for equities, while a surprise upside in employment and wages could spark volatility in both stocks and bonds.

Cross-Asset Moves: Dollar Weakens, Gold Climbs, Oil Stable

Outside equities, cross-asset signals reflect cautious positioning:

• The U.S. dollar eased, hitting its lowest level in more than a month as traders priced in Fed policy easing.

• Gold advanced toward multi-month highs, driven by demand for safe havens amid macro uncertainty.

• Oil prices remained range-bound, with Brent crude holding steady as markets weighed Russian export disruptions against rising output from non-OPEC producers.

These moves highlight how shifting Fed expectations ripple across all major asset classes, reinforcing the interconnected nature of global markets.

Outlook: Balancing Risks in September

Looking ahead, September poses a complex landscape for investors. On one hand, Fed easing expectations and China’s improving growth signals could support risk assets. On the other hand, valuation concerns in tech, ongoing trade-policy uncertainties, and geopolitical risks in Eastern Europe create significant headwinds.

Institutional investors are expected to monitor earnings pre-announcements from U.S. technology giants, central-bank communication, and any signs of supply chain disruptions that could affect global inflation. Breadth in equities remains narrow, with technology and AI-linked sectors dominating returns, leaving markets vulnerable to sharp rotations.