Asian Markets Track Wall St Records after Powell Hints at Rate Cut

AFP/APP

Hong Kong: Asian stocks rose on Thursday, following a Wall Street rally that saw record highs, fueled by increased bets on a September interest rate hike after comments by Federal Reserve Chair Jerome Powell. 

This positive movement included gains in Hong Kong and Shanghai, which had been struggling due to concerns about the Chinese economy, as investors awaited a key Communist Party meeting next week.

During his second day of testimony to lawmakers, Powell indicated that decision-makers would not wait for inflation to hit the bank’s two percent target before loosening monetary policy, stating, “If you waited that long, you’ve probably waited too long.” 

His remarks preceded the latest consumer price index reading expected on Thursday, anticipated to show a further slowdown.

Powell’s comments increased traders’ bets on the Fed reducing borrowing costs in two months, with analysts interpreting his statements as signaling a decision had already been made.

These comments alleviated investor fears that officials might maintain high rates due to a strong labor market and persistent inflation above two percent.

The S&P 500 marked its sixth consecutive record high, while the Nasdaq also reached an all-time peak. 

This optimism extended to Asia, with Hong Kong jumping more than one percent, and gains seen in Tokyo, Shanghai, Sydney, Seoul, Singapore, Wellington, Taipei, and Manila.

Attention is also turning to China’s Third Plenum meeting starting on Monday, where top officials, including President Xi Jinping, are expected to discuss measures to stimulate the world’s second-largest economy amid a property crisis and geopolitical tensions.

Despite hopes for significant policy announcements, experts remain cautious.

Andrew Batson from Beijing-based consultancy Gavekal Dragonomics told AFP he did not anticipate a “fundamental departure from the course Xi has already laid out,” prioritizing technological self-sufficiency and national security over economic growth. Nomura’s Ting Lu noted the meeting aims to discuss long-term ideas and structural reforms rather than immediate policy changes.

While economic growth in the first quarter exceeded forecasts and is expected to surpass the government’s five percent goal for April-June, there are ongoing concerns about insufficient support from officials. 

Taylor Nugent at National Australia Bank cautioned that further monetary policy easing is limited by a reluctance to devalue the renminbi, and expectations for significant policy changes at the Third Plenum are low.