Asian stocks mirror Wall Street rally on Fed bets: Markets Wrap

(Bloomberg) — Asian stocks rose, following a buoyant session on Wall Street amid bets that the Federal Reserve will soon signal its readiness to start cutting interest rates.

Most Read from Bloomberg

The MSCI ACWI index, which tracks emerging and developed stocks, rose for a ninth straight day — its longest winning streak since December. Shares in Japan, South Korea and Australia rose while those in China fell.

Optimism in the US fuelled the rally, with the S&P 500 rising for an eighth straight day. Asian currencies touched their highest level since January, while oil prices extended their biggest decline in two weeks after the US said Israel had accepted a ceasefire proposal in Gaza.

Bets on an imminent Fed easing are supporting equity markets, with investor allocations remaining strong despite the recent bout of volatility and growing economic uncertainty. The MSCI Asia-Pacific index has gained in all but two sessions since Aug. 6, underscoring expectations that U.S. policymakers are likely to cut interest rates in September.

“What we’ve seen is a recent batch of data that has eased concerns about slowing U.S. growth without raising concerns about inflation reaccelerating,” said Kyle Rodda, chief market analyst at Capital.com Inc., adding that this is benefiting Asian stocks excluding Japan, “with a weaker dollar supporting financial conditions and risk appetite.”

In Australia, the central bank signaled it would likely need to keep interest rates at their current 12-year high for an “extended” period to ensure inflation returns to its target range next year. Meanwhile, Chinese banks kept benchmark lending rates unchanged in August as profit margins came under pressure and policymakers focused on the health of financial institutions.

US 10-year Treasury yields rose slightly while US stock futures were little changed. Gold hit a record high above $2,500 an ounce amid expectations that the US Federal Reserve is ready to cut US interest rates.

Volume has been trending lower since the sell-off in early August, with traders reluctant to place big bets ahead of the Federal Reserve’s Jackson Hole economic symposium this week. Central bankers gathering at one of the world’s most prominent annual economic forums are set to find themselves more divided than at any time since before the pandemic.

The story continues

“Markets are noticing that more Fed spokespeople are becoming more dovish, and remember that recent economic data supports Fed cuts,” said Jessica Amir, market strategist at Momo. “This trend is setting markets up for a ‘one-two punch’ at Jackson Hole, with the Fed Chair likely to signal a rate cut.”

In Europe, rising risks to growth prospects have strengthened the case for a monetary policy adjustment when the European Central Bank meets next month, according to Governing Council member Olli Rehn.

Meanwhile, on the corporate front, Alimentation Couche-Tard Inc.’s initial offer to buy Seven & i Holdings Co., owner of the 7-Eleven convenience store chain, could be worth more than 5.63 trillion yen ($38.4 billion), based on the Japanese company’s market value after news of the potential deal was revealed.

Main events this week:

• Eurozone CPI, Tuesday

• Federal Reserve meeting minutes, preliminary review of annual payrolls from the Bureau of Labor Statistics, Wednesday

• Eurozone HCOB PMI, Consumer Confidence, Thursday

• The European Central Bank will publish a report on its July interest rate decision, Thursday.

• US initial jobless claims, existing home sales, S&P global PMI, Thursday

• Japan CPI, Friday

• Bank of Japan Governor Kazuo Ueda attends a special session of the Japanese parliament to discuss raising interest rates on July 31, Friday.

• US New Home Sales, Friday

• Federal Reserve Chairman Jerome Powell speaks at the Jackson Hole Symposium in Wyoming, Friday.

Some key movements in the markets:

Stocks

• S&P 500 futures were little changed as of 12:40 p.m. Tokyo time.

• Nasdaq 100 futures rose 0.1%.

• Japan's Topix index rose 1.3%.

• Australia's S&P/ASX 200 rose 0.2%

• Hong Kong's Hang Seng Index fell 0.3%.

• The Shanghai Composite Index fell 1%.

• Euro Stoxx 50 futures were unchanged.

Currencies

• The Bloomberg Dollar Index was little changed.

• The euro was little changed at $1.1076.

• The Japanese yen fell 0.2% to 146.91 yen per dollar.

• The offshore yuan was little changed at 7.1402 against the dollar.

Cryptocurrencies

• Bitcoin rose 2.6% to $60,650.36

• Ether price rose 1.7% to $2,662.03

Bonds

• The yield on the 10-year US Treasury note rose one basis point to 3.88%.

• The yield on the 10-year Japanese bond fell one basis point to 0.875%.

• The yield on the 10-year Australian bond rose three basis points to 3.94%.

Goods

• West Texas Intermediate crude fell 0.7% to $73.87 a barrel.

• Spot gold fell 0.1 percent to $2,500.72 an ounce.

This story was produced with the help of Bloomberg Automation.

–With the assistance of Jason Scott.

Most Read from Bloomberg Businessweek

©2024 Bloomberg LP