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Asian stock markets are trading mostly lower on Wednesday, as some traders take profits after recent gains, and concerns over tensions in the Middle East and China's drills around Taiwan weigh on sentiment. While expectations for a 50bps rate cut by the US Fed next month have faded, there is still optimism the central bank will cut rates by 25 bps. Chip stocks worldwide plummeted after ASML, the leading chipmaking equipment manufacturer, forecast weak 2025 sales and noted that while AI-related chips are thriving, other semiconductor market segments are not, causing many of its customers to be cautious. ASML's gloomy outlook prompted a series of chip stock sell-offs across Europe, the U.S., and Asia.

Following LVMH's announcement of a quarterly revenue fall for the first time since the pandemic due to a weakening of Chinese consumer demand, investors will be intently watching the performance of luxury equities. This has exacerbated investor apprehensions over a highly reliant industry on China and tempered the recent surge in luxury stocks subsequent to the announcement of Chinese stimulus plans. The chief financial officer of LVMH claims that Chinese consumer confidence has fallen back to its lowest points during the COVID-19 pandemic. Additionally, investors doubt that China would implement comprehensive plans and robust fiscal stimulus measures to boost the faltering economy. Another theme for ASML was China, which accounted for 47% of its overall sales in the most recent quarter but is predicted to reduce that percentage to 20% by 2025. On Thursday, investors will be watching a news conference in Beijing, this time to talk about encouraging the "steady and healthy" growth of the real estate industry. With markets pointing to a rate decrease, the Bank of England's probable course at next month's policy meeting will be shaped by the UK September inflation data, which is expected later today.

The growing number of ECB officials indicating in favor of consecutive rate cuts following last meeting's easing was accompanied by an opening of long positions in Euribor futures for much of September, as shown by the Open Interest Indicator of White contracts. However, this positioning dynamic eased around the turn of the month and for the past week short positions have been opened – the strongest indication of new shorts since May. This is despite the market still pricing in two further 25bp cuts in each of the last two policy meetings of the year. The new shorts may reflect doubts about the magnitude of cuts next year, though the economic outlook in the Euro Area remains weak especially when compared to the US. That said, the indicator shows the longs that were built up last month have not been cut, which is justifiable at this comparatively early stage of the easing cycle. However, to prompt a resumption in new long positions a further ECB rate cut tomorrow will likely have to be accompanied by guidance of more easing to come – this would probably prompt some short covering as well.
 

Overnight Newswire Updates of Note

• World Bank Boost Lending Capacity By $30B Over 10Y
• NZ Annual Inflation Hits 2.2%, Within Target
• BoJ Board Member Urges Gradual Approach Rate Hikes
• HK Economy Set To Be Focus Of John Lee’s Policy Speech
• RBA Reviewing And Gauging China Stimulus Impact
• RBNZ: Higher Rate Was Needed To Offset Bank Liquidity
• Fed’s Bostic: US Jobs And Growth To Stay Robust
• Trump Pledges To Impose Sweeping Car Import Tariffs
• UK Chancellor Faces Unease Of £40B Budget Gap
• UK Inflation Set To Resume Slide After Summer Stall
• Asian Currencies Mixed; Amid Risk-Off Sentiment
• US Dollar Continues Uptrend As Fed Policy Provides Lift
• United Airlines Sees Profit Growth, Launches Buyback

          (Sourced from reliable financial news outlets)

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