Asian stocks took a breather on Monday after global equities enjoyed their best week ever.
Asian stocks took a breather on Monday after global shares enjoyed their best week in nine months on expectations the U.S. economy would avoid a recession and cooling inflation would kick off a cycle of interest rate cuts.
The prospect of lower borrowing costs sent gold above $2,500 an ounce for the first time and the dollar lower against the euro, although both the safe-haven yen and Swiss franc retreated as risk appetite recovered.
Federal Reserve policymakers Mary Daly and Austan Goolsbee were on hand over the weekend to signal the possibility of easing in September, while minutes from the latest policy meeting due out this week should underscore the dovish outlook.
Federal Reserve Chairman Jerome Powell speaks in Jackson Hole on Friday and investors assume he will acknowledge the need for rate cutting.
“While it may be too early to declare victory – and central bankers will no doubt be cautious to avoid this in their official rhetoric – the fear of inflation that had dominated the political debate since prices began to soar during the pandemic has now largely disappeared,” said Barclays economist Christian Keller.
“Inflation may not have reached the 2 percent target yet, but it is close and heading in the right direction.”
Futures are fully priced for a quarter-point move and imply a 25 percent chance of 50 basis points, depending heavily on what the next payrolls report shows.
Goldman Sachs analysts warned that annual benchmark revisions to the jobs series on Wednesday could show a large downward revision of between 600,000 and 1 million jobs, although this would likely exaggerate labor market weakness.
For now, expectations of a softer-than-soft landing for the U.S. economy have sent S&P 500 futures up 0.2 percent and Nasdaq futures up 0.3 percent, adding to last week’s gains.[.N]
MSCI’s index of Asia-Pacific shares outside Japan rose 0.2 percent, after rising 2.8 percent last week.
Japan’s Nikkei fell 0.4 percent, but that followed a nearly 9 percent rally last week.
The Federal Reserve isn’t the only one considering loosening policy: Sweden’s central bank is expected to cut rates this week, possibly by a whopping 50 basis points.
In currency markets, the euro held steady at $1.1025, just below last week’s high of $1.1047. The dollar was at $147.79, having touched as high as $149.40 last week. [USD/]
“The Fed’s overall message this week will likely reassure market participants looking for confirmation that policy rate cuts are now imminent,” said Jonas Goltermann, deputy chief markets economist at Capital Economics.
“As such, the dollar may well remain under pressure in the near term, although given the extent to which Fed easing is already off the table, we doubt the dollar will weaken further.”
A weaker dollar combined with lower bond yields helped gold hold at $2,506 an ounce, and near a record high of $2,509.69. [GOL/]
Oil prices fell again as concerns about Chinese demand continued to weigh on sentiment. [O/R]
Brent crude fell 29 cents to $79.39 a barrel, while U.S. crude lost 27 cents to $76.38 a barrel.
(Only the headline and image of this report may have been reworked by Business Standard staff; the rest of the content is auto-generated from a syndicated feed.)
First published: August 19, 2024 | 7:36 a.m. IS
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