Global Markets Rally Ahead of Potential US Rate Cut
The Asian and European stock markets surged on Tuesday, fueled by optimism that the US Federal Reserve will announce a significant interest rate cut. Investors are increasingly betting on a reduction of up to 50 basis points, which has boosted optimism in global markets.
In Asia, most markets recorded gains, with currencies like the Malaysian ringgit and Indonesian rupiah rising against a weaker dollar. However, Japan’s Nikkei 225 fell one percent due to the yen’s strength, which impacted exporters.
In Europe, stocks climbed as data suggested the Federal Reserve is making progress in its inflation battle, adding to hopes for the rate cut. The dollar weakened against its major peers, sinking below 140 yen for the first time since summer 2023.
The likelihood of a rate cut has been fueled by a string of data indicating that US inflation is easing back to the Fed’s two-percent target, while the labour market is slowing. Fed boss Jerome Powell has already hinted that officials will begin cutting rates, but debate has focused on whether they will opt for 25 or 50 basis points.
Independent analyst Stephen Innes warned that a bigger cut could signal concern about the economy, while analysts at Asymmetric Advisors expect the Bank of Japan to stand pat, but note that the yen’s strength has relieved pressure on Japan’s central bank to act.
As investors await the Fed’s decision on Wednesday, they are also keenly watching the Bank of Japan’s policy decision on Friday. The strengthening yen has hit the Nikkei 225, but optimism for a big Fed cut has boosted most other Asian markets.
Key Figures:
- Tokyo – Nikkei 225: DOWN 1.0 percent at 36,203.22 (close)
- Hong Kong – Hang Seng Index: UP 1.4 percent at 17,660.02 (close)
- London – FTSE 100: UP 0.8 percent at 8,342.05
- Shanghai – Composite: Closed for a holiday
- Dollar/yen: DOWN at 140.60 yen from 140.63 yen on Monday
- Euro/dollar: UP at $1.1137 from $1.1131
- Pound/dollar: UP at $1.3218 from $1.3216
- Euro/pound: UP at 84.25 pence from 84.22 pence
- West Texas Intermediate: UP 0.3 percent at $70.27 per barrel
- Brent North Sea Crude: UP 0.1 percent at $72.80 per barrel
- New York – Dow: UP 0.6 percent at 41,622.08 (close)
