Asia stocks soar on hopes of US rate cut

Asian stocks surged to 27-month highs on Thursday, buoyed by weaker US economic data that raised the likelihood of a September rate cut, which in turn boosted bonds and commodities while pressuring the dollar.

MSCI’s broadest index of Asia-Pacific shares outside Japan climbed 0.9 per cent to reach its highest level since April 2022. Japan’s Nikkei gained 0.9 per cent, nearing its March peak, while the Topix index hit an all-time high.

Taiwan’s main index also reached a record high, driven by gains in the tech sector and Taiwan Semiconductor Manufacturing Co., which surpassed T$1,000 for the first time.

The US dollar index was close to flat at 105.32, following a decline to its lowest level since June 13. The drop in the dollar was a boon for commodities, with gold rallying to $2,358 an ounce from $2,318 earlier in the week. Brent crude fell 47 cents to $86.87 a barrel, and US crude dipped 53 cents to $83.35 per barrel.

In the UK, sterling held steady at $1.2740, and FTSE futures inched up 0.1 per cent. The euro was also up at $1.0785. Markets are on edge ahead of the UK election, with polls indicating a likely Labour Party victory.

US futures markets indicated little change, with S&P 500 and Nasdaq futures holding steady after reaching record highs on the back of weaker economic data. The US ISM services activity index fell to its lowest level since mid-2020, and the ADP employment report showed weak job growth ahead of the June payrolls report.

Analysts expect the Federal Reserve to cut interest rates in September, with the probability of a cut rising to 74 per cent from 65 per cent. Yields on 10-year Treasury bonds dropped by 8 basis points to 4.355 per cent, reflecting market expectations for easing monetary policy.

Attribution: Reuters.