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Asian stocks and gold rise as hopes grow for rate cuts amid easing inflation | Stock market today

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Asian stocks took a breather on Monday after global equity markets had their best week.

3 minutes reading time Last updated: August 19, 2024 | 7:37 am IS

Asian shares took a breather on Monday after global equity markets posted their best week in nine months on expectations that the U.S. economy could avoid a recession and cooling inflation would trigger a cycle of interest rate cuts.

The prospect of lower borrowing costs pushed gold prices above $2,500 an ounce for the first time and the dollar fell against the euro. However, both the safe-haven yen and the Swiss franc lost value as risk appetite recovered.

Federal Reserve members Mary Daly and Austan Goolsbee were out over the weekend to raise the possibility of monetary easing in September, and the minutes of the latest monetary policy meeting, due this week, are likely to underscore the dovish outlook.

Fed Chairman Jerome Powell speaks in Jackson Hole on Friday and investors expect him to acknowledge the arguments for a rate cut.

“While it may be too early to declare victory – and central bankers will certainly be wise to avoid doing so in their official rhetoric – the inflation fears that had dominated the policy debate since prices soared during the pandemic have now largely disappeared,” said Barclays economist Christian Keller.

“Inflation may not have quite reached the two percent target yet, but it is close and heading in the right direction.”

In futures, a quarter-point move is already fully priced in, giving a 25 percent chance of 50 basis points, with much depending on what the next jobs report shows.

Analysts at Goldman Sachs warned that the annual revision of labor market data is due on Wednesday. This could lead to a significant downward revision of 600,000 to one million jobs, which would probably overstate the weakness of the labor market.

Expectations of a less than soft landing for the US economy are currently pushing S&P 500 futures up 0.2 percent and Nasdaq futures up 0.3 percent, adding to last week's gains.[.N]

MSCI's broadest index of Asia-Pacific stocks outside Japan rose 0.2 percent, after gaining 2.8 percent last week.

Japan's Nikkei lost 0.4 percent, but had previously risen by almost 9 percent last week.

The Fed is by no means the only one considering a looser monetary policy: the Swedish central bank is also expected to cut its key interest rate this week, possibly by a whopping 50 basis points.

In foreign exchange markets, the euro remained stable at $1.1025, just below last week's high of $1.1047. The dollar was at 147.79, after hitting a high of 149.40 last week. [USD/]

“The Fed's overall message this week should reassure market participants waiting for confirmation that rate cuts are now imminent,” said Jonas Goltermann, deputy chief markets economist at Capital Economics.

“Therefore, the greenback could well remain under pressure in the short term. However, given that Fed easing is already priced in, we doubt that further dollar weakness is imminent.”

A weaker dollar and lower bond yields are helping to keep gold prices at $2,506 an ounce and near their all-time high of $2,509.69. [GOL/]

Oil prices fell again as concerns about Chinese demand continued to weigh on sentiment. [O/R]

Brent fell 29 cents to $79.39 a barrel, while U.S. oil lost 27 cents to $76.38 a barrel.

(Only the headline and image of this report may have been edited by Business Standard staff; the rest of the content is auto-generated from a syndicated feed.)

First published: August 19, 2024 | 7:36 am IS

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