Asian shares rally on rate cut hopes

Asian stocks rose on Monday as investors anticipated central banks in Europe and possibly Canada lowering interest rates to address economic slowdown, Reuters reported. This positive outlook persisted despite inflation worries that may delay easing measures.

The market rally was supported by upbeat economic reports from China. The Caixin manufacturing PMI reached a two-year high of 51.7 in May, up from 51.4 in April.

Moreover, factory output increased for the first time in a year in Japan and South Korea, signaling a recovery in regional manufacturing.

MSCI’s broadest index of Asia-Pacific shares outside Japan jumped 1.4 per cent, recovering from a 2.5 per cent decline last week. Chinese blue chips gained 0.3 per cent, while Japan’s Nikkei rose 1.1 per cent and South Korea’s Kospi advanced 1.8 per cent.

The risk-on sentiment spread to European markets, with EUROSTOXX 50 futures climbing 1.0 per cent and FTSE futures up 0.8 per cent.

The European Central Bank (ECB) is almost certain to cut rates by a quarter-point to 3.75 per cent on Thursday, marking the first time it would ease policy before the US Federal Reserve.

Other market movements

• The Japanese yen remains the weakest major currency, despite government intervention efforts. The dollar firmed to 157.41 yen, close to last week’s peak.
• Gold prices dipped slightly at $2,322 an ounce after a four-month rally.
• Oil prices fluctuated after OPEC+ agreed to extend most production cuts into 2025, with some easing starting in October 2024.