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Asian Market Shares Drop; Hong Kong Protests Persist

Share in Asia slumped during early Monday sessions. Hong Kong stocks, primarily, drifted after three days of protests. These protests are still ongoing as political unrest sparked the anti-extradition movement.

Debatably, the most significant movement in the Asian market would be Hang Seng Index’s as it decreased 1.2% to 28,051.

Later in the day, the Hong Kong and Macau Affairs Office, which reports to China’s cabinet, will conduct a briefing regarding the turmoil. The meeting was a first since the end of the British colonial rule in 1997.

Over the weekend, thousands of protesters assembled in downtown Hong Kong. Their agenda was to demonstrate their disapproval against Chief Executive Carrie Lam and her proposed bill.

The extradition bill would allow the deporting of felons to mainland China, which many feared could further restrict freedom. It might serve as a catalyst for a rally by Hongkongers as they chant the words “liberate Hong Kong.”

The police have arrested at least 49 people, while a total of 5 have died; all resulting from suicide, according to the government.

Financial Secretary Paul Chan said in a blog post on Saturday that several domestic retail and catering businesses are now undergoing a “sharp decline” in business.

According to Chan, the “unrest in Hong Kong dampens” foreign tourists and enterprises’ appetite for “traveling and investment,” and if the down-move lasts, “everyone’s employment and livelihood will be at stake.”

Over in mainland China, both the Shanghai Composite and the Shenzhen Component were down by 0.2%.

Asian market shares in Japan and Korea both plunged as the Nikkei 225 and KOSPI faltered by 0.5% and 1.7%, respectively.

Australia’s ASX 200 rose 0.3%.

Chinese and United States’ officials will meet Tuesday for a two-day trade talk, reportedly.

Trade Talks and the Fed Meeting

On the same day, Fed officials will begin their meeting on monetary policy in Washington. Fed Chair Jerome Powell will also hold a press conference after the FOMC’s decision on Wednesday.

Data released during the weekend showed that Chinese industrial firms’ profits thinned in June. The disappointing numbers fueled concerns that the trade war continues to bring about economic growth.

“We remain cautiously optimistic that both sides can agree on a narrow agreement that addresses important trade-related issues, such as U.S. demands to increase exports,” Barclays analysts said in a note.

However, they also remain skeptical about “the prospects of a broader agreement” amplified by the “more challenging security-related issues.”

The drop in Asian market shares shows a more probable rate-cut implementation from the Fed as interest rate futures are now fully priced in for a 25-basis-point cut.

However, there remains a sliver of a chance for a half-point cut happening.

Notably, the central bank’s future endeavors are gaining speculation of a full rate cut of 100 basis points over the next year.

“The messaging will be key and will help markets determine whether the rate cut is just an insurance cut, or the Fed is embarking on a full easing cycle as the market currently prices in,” said an analyst who noted the strong Q2 U.S. economic growth reading last week.

He added that the U.S. economy remains “the least dirty t-shirt in the global laundry basket” pointing to a stronger dollar against other safe havens—more prominently, those that circulate within the Asian market—in response.

U.S. July jobs report is due on Friday.

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