Asian Markets Lifted by US Data, Fresh Rate Cut Hopes

AFP/APP

Hong Kong: Asian markets rose Thursday after US data provided a fresh indicator that inflation was easing and Federal Reserve boss Jerome Powell soothed worries about the bank’s plans to cut interest rates this year.

An equities rally that started at the back end of 2023 has stuttered in recent weeks after a string of reports suggested the economy was too strong and prices too sticky for officials to begin easing monetary policy this year. 

Warnings from decision-makers that they were worried about bringing down borrowing costs too soon have also played on investors’ minds, causing them to pare back expectations for how many, if any, were coming before January.

But those concerns were allayed somewhat Wednesday when Powell said he still saw cuts coming this year.

He told a conference in California that rates, which are at a two-decade high, were doing their job but said moving too soon could be “quite disruptive” for the world’s top economy.

But if the economy continues to evolve as expected, most Fed participants still expect it will be “appropriate to begin lowering the policy rate at some point this year”. 

Evercore’s Krishna Guha said: “Powell says recent data has not materially changed the picture.

“We read this as confirming that the spasm of concern in markets that the economy might be too strong for the Fed to cut in June was overdone, and the base case remains June and three cuts this year.”

Confidence among traders was given an extra lift by figures showing a slowdown in growth in the services sector and a sharp drop in input costs during March, suggesting an easing of inflation.

That contrasted with a stronger-than-expected reading of US manufacturing and prices paid earlier this week, which sparked questions about the Fed’s rate-cutting timeline.

A report pointing to a further slowdown in eurozone inflation gave confidence an extra boost.

The S&P 500 and Nasdaq rose on Wall Street, and most of Asia followed suit.

Tokyo, Sydney, Seoul, Singapore, and Jakarta were all in the green, though there were small losses in Manila and Wellington.

Hong Kong and Shanghai were closed for holidays.

Traders are now looking forward to the release of US jobs data, which is due Friday and could have a bearing on the Fed’s plans. 

A big miss on the downside could boost hopes for a June rate cut, though a forecast-beating read would likely spark a sell-off in markets.

Gold hit another record, $2,304.96 per ounce, according to Bloomberg News, after Powell’s remarks, with geopolitical concerns fuelled by the Middle East crisis and the Ukraine war.

And oil was sitting at around five-month highs owing to worries about Israel’s battle with Hamas and Iran’s warning to retaliate over a blast at a consular annex in Damascus that killed seven Revolutionary Guards, including two generals. Tehran blames Israel.

A call by OPEC+ for its members to maintain its strategy of reducing output also helped push up prices.

Key figures at 0300 GMT

Tokyo-NNikkei 225: UP 1.7 percent at 40,101.82 (break)

Hong Kong – Hang Seng Index: Closed for holidays

Shanghai – Composite: closed for holidays.

Dollar/yen: DOWN at 151.68 yen from 151.70 yen on Wednesday.

Euro/dollar: UP at $1.0843 from $1.0837 

Pound/dollar: UP at $1.2652 from $1.2650

Euro/pound: UP at 85.72 pence from 85.64 pence

West Texas Intermediate: UP 0.3 percent at $85.69 per barrel

Brent North Sea Crude: UP 0.3 percent at $89.60 per barrel

New York – Dow: DOWN 0.1 percent at 39,127.14 (close)

London – FTSE 100: FLAT at 7,937.44 (close)