Mumbai, 4 Jul (Commoditiescontrol): Asian stocks soared to 27-month highs on Thursday, buoyed by weaker U.S. economic data that increased the likelihood of a Federal Reserve rate cut in September. This optimism bolstered bonds and commodities while weighing down the dollar.
The U.S. holiday resulted in thin trading volumes as investors awaited the outcome of the UK election, where opinion polls have consistently predicted a landslide victory for the Labour Party over the Conservatives.
Asian equity markets climbed, influenced by a strong performance on Wall Street. A contraction in U.S. services activity and disappointing private employment numbers supported the case for Fed rate cuts. Investors also evaluated underwhelming business activity data from Hong Kong and Australian trade figures. Shares in Australia, Japan, South Korea, Hong Kong, and China all advanced. Japan’s Topix Index was nearing record highs set in December 1989.
FTSE futures edged up 0.1%, while the British pound strengthened to $1.2750. EUROSTOXX 50 futures remained mostly unchanged. MSCI's broadest index of Asia-Pacific shares outside Japan added 0.7%, reaching its highest level since April 2022. Japan's Nikkei rose 0.4%, approaching its March peak, while the Topix reached new all-time highs.
S&P 500 futures and Nasdaq futures were steady after hitting record highs overnight due to weak U.S. economic data. The U.S. ISM services activity index fell to its lowest since mid-2020, with employment notably weak ahead of the June payrolls report due on Friday. Analysts noted discrepancies with the stronger PMI survey of services but pointed out that price measures in both surveys indicated easing inflation.
Markets increased the probability of a September rate cut to 74% from 65%, while pricing in 47 basis points of easing for the year. Yields on 10-year Treasuries fell 8 basis points to 4.355%.
The weaker U.S. economic data also impacted the dollar, which fell across the board. The euro rose to $1.0793, up from a recent low of $1.0666, while the dollar index reached a three-week low. The Australian dollar hit a six-month peak of $0.6733 as markets speculated that local rates could rise. The yen remained weak, hitting multi-year lows against several currencies as investors favored carry trades, with the dollar at 161.40 yen after reaching a 38-year high of 161.96 overnight.
The dollar's decline benefited commodities, with gold rallying to $2,358 an ounce from $2,318 earlier in the week. Oil prices eased slightly after overnight gains driven by a significant drop in U.S. crude stocks, indicating stronger demand as the U.S. driving season begins. Brent crude dipped 31 cents to $87.03 a barrel, while U.S. crude fell 33 cents to $83.55 per barrel.
(By Commoditiescontrol Bureau: 09820130172)
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