Asian markets rise on rate cut hopes

Asian stocks rose and the dollar weakened on Monday following a strong week for global equities. There is optimism that the US economy will avoid a recession and that decreasing inflation will lead to interest rate cuts.

The prospect of lower borrowing costs propelled gold prices above the $2,500 per ounce for the first time, while the dollar weakened against the euro. However, the Japanese yen surged, impacting the Nikkei index.

Recent comments from Federal Reserve officials Mary Daly and Austan Goolsbee have hinted at the possibility of an interest rate cut in September.

The release of minutes from the last policy meeting this week is expected to further solidify the dovish outlook.

Market participants anticipate that Fed Chair Jerome Powell will acknowledge the case for a rate cut at the Jackson Hole symposium on Friday.

Barclays economist Christian Keller noted that while inflation may not have reached the two per cent target yet, it is moving in the right direction.

Futures markets are currently pricing in a quarter-point rate cut, with a 25 per cent chance of a more aggressive 50 basis point reduction.

The softer economic outlook has boosted investor confidence, with S&P 500 and Nasdaq futures trading higher.

European markets are also expected to open on a positive note. In Asia, the MSCI’s broadest index of Asia-Pacific shares outside Japan gained 1.0 per cent, while Japan’s Nikkei fell 1.2 per cent due to yen appreciation.

In the currency markets, the dollar fell 1.0 per cent to 146.20 yen, moving further away from last week’s high of 149.40. The euro strengthened to $1.1030, slightly below last week’s peak of $1.1047.

Oil prices dropped due to ongoing worries about Chinese demand, with Brent declining to $79.57 per barrel and US crude falling to $76.45 per barrel. Gold prices benefited from the softer dollar and lower bond yields.

Attribution: Reuters

Subediting: M. S. Salama