China's PMI exceeded expectations, boosting Hong Kong stocks with a big pump, while Bitcoin fell 4% for the week due to Whale selling and the big dump in the US stock AI zone | The entire market awaits the US Non-farm Payrolls (NFP) to decide the direction.

China's August manufacturing PMI unexpectedly rose to 50.5, returning to the expansion zone, significantly boosting market sentiment and easing concerns about an economic slowdown triggered by U.S. tariffs. As a result, the Hang Seng Index surged 2.16% in early trading on Monday, while the CSI 300 and Shanghai Composite Index also saw slight increases. However, uncertainty surrounding U.S. tariff policies and the cautious sentiment ahead of this week's crucial U.S. Non-farm Payrolls (NFP) data continue to weigh on other Asia-Pacific markets, with the Nikkei 225 index falling 2.03%. The market is focused on the Non-farm Payrolls data, as it will directly impact the Fed's interest rate cut path and risk appetite. Meanwhile, the combination of the Fed's interest rate cuts and expectations of a Bank of Japan rate hike could lead to a significant drop in the dollar/yen exchange rate or trigger yen carry trade closures, thereby impacting global risk assets. Bitcoin fell 4% last week, dragged down by whale selling and a big dump in the U.S. stock AI zone, with future trends still closely tied to global liquidity and U.S. stock performance.

###Chinese data becomes a strong stimulant, Hong Kong stocks lead the rise in the Asia-Pacific market

Key Chinese economic data boosted market sentiment and alleviated concerns that U.S. tariffs would trigger an economic slowdown. RatingDog's China Composite Manufacturing PMI unexpectedly rose from 49.5 in July to 50.5 in August. Economists had previously expected the PMI to remain unchanged at 49.5. An increase in new orders and a slowdown in external demand drove manufacturing output, pushing the PMI above the crucial threshold of 50. In early trading on Monday (September 1), the Hang Seng Index reacted to this data, rising 2.16% to 25,619 points. The mainland Chinese stock market was also boosted, with the CSI 300 Index and the Shanghai Composite Index rising by 0.30% and 0.46%, respectively.

###Uncertainty over tariffs clouds the market, waiting for guidance from US Non-farm Payrolls (NFP)

At the same time, the uncertainty over trade tariffs and the cautious sentiment in the market ahead of the highly anticipated US Non-farm Payrolls (NFP) report (September 5) have put pressure on broader Asian stock markets. On August 29 (last Friday), a US appeals court ruled that President Trump's tariff policy was illegal. This ruling came after the US markets closed and just before the Labor Day weekend. However, the appeals court allowed the US government to maintain the tariffs during the potential appeal to the Supreme Court. President Trump dismissed the ruling as incorrect. He also warned that removing the tariffs would "bring a total disaster to the country. It would weaken us financially, and we must be strong." If the Supreme Court overturns the appeals court's ruling, it could rule the tariffs as legal, thereby reinforcing President Trump's power to impose tariffs at will. The Nikkei 225 index fell 2.03% in early trading, while the Australian ASX 200 index dropped 0.58%.

###Why is the Non-farm Payroll report crucial? It concerns the Fed's rate path.

The U.S. Non-farm Payrolls report for July has raised concerns about the labor market and intensified speculation about aggressive rate cuts by the Fed. However, last Friday's personal income and spending report showed signs of rising inflation, challenging bets on multiple rate cuts by the Fed. The U.S. Non-farm Payrolls report could determine the Fed's policy outlook, thus affecting risk appetite. A rising unemployment rate and slowing wage growth will suppress consumer spending, a key driver of the U.S. economy. In the context of high inflation, a sharp deterioration in the labor market could also reignite concerns about stagflation, increasing the uncertainty of the Fed's monetary policy.

###Why Traders Need to Keep an Eye on the Bank of Japan and the Yen? Potential Arbitrage Close Position Risks

The Fed's potentially more dovish interest rate path aligns with the timing of the Bank of Japan (BoJ) possibly raising rates in the fourth quarter. The combination of Fed rate cuts and BoJ rate hikes could lead to a decline in the USD/JPY and may trigger Yen Carry Trade Unwind. As expectations for the interest rate differential to narrow (which is favorable for the Yen), the USD/JPY has fallen from 150.917 on August 1 to 146.948 on September 1. A further significant drop in the USD/JPY exchange rate may trigger margin calls on risk asset positions and force investors to close their Yen Carry Trades, further boosting the Yen. In 2024, in response to the BoJ reducing purchases of Japanese Government Bonds (JGB) and unexpectedly raising rates, the Nasdaq Composite Index plummeted 11.2% from July 31 to August 5. The BoJ's monetary policy decision in July led to margin calls and Yen Carry Trade Unwind.

###US stock futures rise slightly but the foundation is unstable, attention on China-US trade negotiations

Outside of the Asian markets, attention has shifted to the U.S. market, with stock futures slightly rising in early trading. Optimistic data from China and hopes for a trade agreement between China and the U.S. have boosted U.S. stock futures. China's chief trade negotiator, Li Chenggang, met with U.S. officials last week to discuss trade terms. Nasdaq 100 E-mini futures rose by 17 points and S&P 500 E-mini futures rose by 4 points, while Dow Jones E-mini futures increased by 45 points. However, due to the market's caution ahead of key economic data releases this week, the gains are modest, leaving U.S. futures on shaky ground.

###Outlook: US Labor Market Data in the Spotlight

Looking ahead, investors should be prepared to cope with increasing market volatility. The US JOLTS job openings, ADP employment change, initial jobless claims, and non-farm payroll report will focus on the US labor market. Weak labor market data could raise expectations for multiple rate cuts by the Fed, thereby boosting market sentiment. On the other hand, strong employment data could signal a more hawkish rate path from the Fed, putting pressure on the stock market. The Bank of Japan may closely monitor these data and the Fed's policy signals. If the Fed hints at aggressive rate cuts, it would be reasonable for the Bank of Japan to delay rate hikes to avoid market turmoil.

###Technical Point Analysis: Short-term Bullish but Watching the NFP

After the morning rise, the overall short-term bias still looks bullish. However, the bullish momentum depends on the upcoming US Non-farm Payrolls (NFP) report (September 5).

• Dow Jones Index: Resistance levels are the August 22 high of 45,841, 46,000, and then 46,500; support levels are 45,500, 45,000, and then the 50-day moving average (44,513). The daily chart is sending a bullish price signal.
• Nasdaq 100 Index: Resistance levels are seen at the August 18 high of 23,882, 24,000, and then 24,500; Support level is the 50-day exponential moving average (23,094), followed by 23,000. A bullish price signal has been issued.
• S&P 500 Index: Resistance levels are at the August 28 high of 6,523, then 6,750; support levels are at 6,400, the August 20 low of 6,363, then the 50-day exponential moving average (6,332). A bullish price signal has been issued. Will U.S. labor market data and Fed spokespersons push the U.S. market to new highs? This week may prove to be critical.

###Cryptocurrency Update: Bitcoin fell 4% last week, dragged down by whales and the stock market.

Last week, the price of Bitcoin experienced a fall of about 4%. While this is not uncommon for a cryptocurrency known for its volatility, it is undoubtedly unsettling for those investors who witnessed its price surge to over $120,000 two weeks ago, only to fall back to the $100,000 mark.

####Whale dumping triggers a chain reaction

What caused this sudden drop? A closer look reveals a dual blow from a "whale" and a stumbling stock market. The initial trigger for the price drop was a single large holder of Bitcoin who has held for a long time. According to on-chain analysis platform Lookonchain, this "whale" holds over 100,000 Bitcoins. Last Monday, they suddenly began to sell their holdings on exchanges like Hyperliquid and shifted to Ethereum (ETH). This sell-off lasted for more than a day, causing the price of Bitcoin to plummet from around $114,000 to $108,600. Fortunately, once the cause was identified as a one-time event, the market stabilized and began to recover. By Thursday evening, Bitcoin had climbed back to $113,500, nearly returning to its pre-drop starting point.

####AI stocks drag down the market, risk assets exhibit increased correlation.

Just as Bitcoin is recovering, a new unexpected threat has emerged. The artificial intelligence (AI) and data center companies that led the rise of US stocks throughout the year released disappointing second-quarter earnings reports. The reports mentioned concerns over high debt and declining profitability.

• CoreWeave (CRWV)'s stock price fell by 33.1% after the second quarter report.
• Marvell Technology (MRVL) fell by about 19% due to its data center division's performance not meeting market expectations.
• Even market leader NVIDIA, NVDA(, despite achieving record second-quarter revenue, was not spared as negative sentiment spread, falling by 3.32%.

The decline of AI stocks caused the Nasdaq index to fall by 1.32%, marking the most severe drop since the big dump triggered by employment data on August 1. Due to the high correlation between Bitcoin and the Nasdaq index since June, its price has dropped by 3.72%. This series of events illustrates how tightly interconnected today's risk assets are.

###Where will Bitcoin go in the future? Keep an eye on US Treasury auctions and Non-farm Payrolls (NFP)

As Bitcoin struggles to move forward, market predictions have become divided. Some analysts remain bullish, predicting a rapid recovery, while others worry that it may further fall to the $100,000 level. Many expect the price to find support around $107,000, but some pessimists warn that if the downward trend intensifies, it could deeply retrace to $92,000. This pessimistic sentiment stems from Bitcoin's recent lack of upward momentum compared to Ethereum, which has garnered more market attention. Despite also dropping 6.31% last week, Ethereum's market sentiment and upward momentum remain strong. The "Unstaking Fear" among Ethereum investors once seemed widespread, but now it appears to have significantly dissipated. Tom Lee, chairman of Ethereum DAT company Bitmine, even claims that ETH could reach $5,500 within weeks and $10,000 to $12,000 by the end of the year. This would require it to achieve an astonishing 100% increase from its current trading price of $4,483 within four months.

In the coming week, two major macroeconomic events may impact the market. First is the U.S. bond auction on Tuesday, during which nearly $290 billion in short-term bonds will flood the market. This may harm liquidity and put further pressure on Bitcoin. The second is the U.S. Non-farm Payrolls (NFP) data and unemployment rate data on Friday. If the NFP is weak at below 60,000, it may increase expectations for continued rate cuts, potentially boosting risk assets like Bitcoin.

Last week's events proved that the price of Bitcoin is now more closely linked to global liquidity and the broader US market than to its own internal driving factors. During this potentially high volatility period, investors should remain cautious.

###Conclusion

The market is at the intersection of multiple macro variables: a brief recovery in Chinese economic data, legal battles over U.S. tariff policies, ultimate guidance from the Fed and US Non-farm Payrolls (NFP), as well as the risk of arbitrage trading position closures brought about by potential divergence in monetary policies between the Bank of Japan and the Central Bank of the U.S. Cryptocurrencies such as Bitcoin have deeply integrated into the fluctuations of the traditional financial system, and their trends are no longer isolated. For traders, the key this week lies in the strength or weakness of the U.S. labor market data, which will be the most critical factor determining the Fed's policy pace, thus affecting global liquidity expectations and risk preferences. Although the short-term market technical structure leans bullish, everything needs to wait for the verdict of the US Non-farm Payrolls (NFP), and cautious operations are paramount.