Tokyo, August 15 – Asian markets showed resilience on Thursday, buoyed by positive data and expectations for changes in U.S. monetary policy. The dollar remained under pressure amid lower U.S. Treasury yields, as investors anticipate potential interest rate cuts by the Federal Reserve.
Asian Markets and Economic Data
Asian stocks generally performed well, taking cues from Wall Street’s gains. The Nikkei 225 in Japan rose 0.8% as of 0540 GMT, bolstered by robust economic growth figures for the second quarter. Australia’s stock benchmark, the ASX 200, climbed 0.14%.
Chinese blue-chip stocks, represented by the CSI 300, added 0.7%, supported by expectations of additional stimulus from Beijing in response to weak economic data. Conversely, Hong Kong’s Hang Seng index slipped 0.2%.
U.S. S&P 500 futures pointed 0.16% higher after the index advanced 0.4% on Wednesday. The S&P 500’s rise was attributed to the slowest increase in the consumer price index (CPI) in over three years, reinforcing market speculation about forthcoming rate cuts by the Federal Reserve.
U.S. Dollar and Treasury Yields
The U.S. dollar remained weak, slipping to its lowest level against the euro since late last year. The euro traded flat at $1.1012, after reaching $1.10475 in the previous session. The 10-year Treasury yield ticked up slightly to 3.83% during Asian trading hours, following a dip to 3.811% on Wednesday.
TD Securities analysts noted that the recent CPI report “checked the box” for the Federal Reserve to potentially start cutting rates in September. While a 25 basis-point cut is expected, a 50 basis-point reduction is not entirely off the table. Market expectations for a rate cut were bolstered by signs of slowing inflation, though concerns about persistent inflation tempered expectations for a larger cut.
Market Sentiment and Currency Movements
Traders are largely anticipating that the Federal Reserve will reduce rates on September 18, marking the first rate cut in 4.5 years. However, opinions are divided on whether the reduction will be a substantial 50 basis points or a more modest 25 basis points. Recent inflation data has led to a decrease in bets on a larger cut, from 50% to 37.5%.
The dollar eased 0.1% to 147.12 yen, reflecting ongoing consolidation around the 147 mark. In contrast, sterling showed a slight recovery, rising 0.1% to $1.2843 after softer-than-expected UK inflation figures suggested the possibility of deeper rate cuts by the Bank of England. The Australian dollar advanced 0.36% to $0.6620, rebounding from early losses due to a surprise surge in employment.
Commodities
Gold prices edged up 0.2% to $2,453 per ounce, recovering slightly from a 0.7% drop the previous day. Oil prices remained relatively stable after recent declines. Brent crude futures held steady at $79.81 per barrel, while U.S. West Texas Intermediate crude rose 0.1% to $77.06. Both benchmarks had fallen more than 1% on Wednesday following an unexpected increase in U.S. crude inventories.
Outlook
As markets await the release of U.S. retail sales figures later in the day, investors remain vigilant for any signals of economic downturns that might influence Fed policy decisions. A negative retail control sales number could heighten recession concerns and impact market sentiment.
In summary, Asian stocks are performing well amid expectations for U.S. monetary easing, while the dollar weakens in response to lower Treasury yields. The economic landscape remains dynamic, with key data releases and Fed decisions poised to drive further market movements.
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