Asian markets experienced a largely positive trend on Tuesday, driven by optimism that the Federal Reserve will cut interest rates later this year. The Tokyo market reached a record high, while gold prices also surged to a new peak. This upward momentum was fueled by the expectation that the Federal Reserve will adopt a more dovish monetary policy stance, potentially leading to three quarter-point rate reductions by the end of the year.
The US jobs report for last month showed a significant miss in job creation, sparking concerns about the strength of the global economy. However, this development has also raised hopes that the Fed will loosen its monetary policy to stimulate growth. Investors are eagerly awaiting the release of fresh data on inflation to gain a better understanding of the Fed’s next move. Fed Chair Jerome Powell’s recent speech in Jackson Hole, Wyoming, further bolstered expectations of a rate cut.
Asian markets responded positively to the developments on Wall Street, where the Nasdaq achieved another record high. Hong Kong’s Hang Seng Index rose by over 1%, while Shanghai, Seoul, Taipei, and Manila also saw gains. However, Sydney, Singapore, and Wellington experienced declines. The Indonesian stock market and the rupiah fell by more than 1% after President Prabowo Subianto removed the Finance Minister in a cabinet reshuffle following deadly anti-government protests.
Gold prices reached a new high above $3,650, reflecting the prevailing optimism about potential rate cuts. Despite the upbeat mood, IG markets analyst Fabien Yip cautioned that investors are becoming increasingly concerned that monetary policy easing might not be sufficient to address labor market deterioration.
In Japan, the Tokyo market spiked to a new record, driven by hopes that the next leader of the ruling Liberal Democratic Party will introduce a fresh round of economic stimulus. The upcoming LDP leadership race is being closely watched, as the fiscal and monetary policy stances of the candidates will be crucial in determining the future direction of Japanese stocks and the yen.
This week, investors will also be focusing on the European Central Bank’s policy decision, as well as the uncertainty in France following the ousting of Prime Minister Francois Bayrou in a confidence vote. The dollar-yen exchange rate fell, while the euro and pound rose against the dollar. Oil prices also saw a modest increase, with West Texas Intermediate and Brent North Sea Crude rising by 0.4%.
The current market trends are being driven by expectations of monetary policy easing and potential economic stimulus. As investors await key data releases and policy decisions, the global economy remains poised for significant developments in the coming weeks. The significance of these events will be closely monitored, with potential implications for international trade, economic growth, and financial markets.
