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Global equity/currency market update: Asian Shares Rise on Fed Rate Cut Expectations; Euro Advances

6 Jun 2024 8:44 am
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Mumbai, 6 Jun (Commoditiescontrol): Asian shares climbed on Thursday, buoyed by rising expectations that the U.S. Federal Reserve will cut interest rates in September. This sentiment also lifted oil prices and drove Treasury yields to their lowest levels in two months, following data hinting at an easing U.S. labor market. Meanwhile, the euro advanced ahead of the European Central Bank (ECB) policy meeting, where a rate cut is widely anticipated.

MSCI's broadest index of Asia-Pacific shares outside Japan gained 1.14%, led by tech stocks. The index is set for a 2.7% gain this week, snapping a two-week losing streak. Japan's Nikkei also rose by 1%.

Chinese stocks followed suit, with the blue-chip index up 0.38%, while Hong Kong's Hang Seng index increased by 0.81%. Indian stocks, however, were poised for a muted start amid political uncertainties as Prime Minister Narendra Modi was named to lead a new coalition government for a third term. This coalition, reliant on regional allies with historically fluctuating loyalties, could complicate the new cabinet's reform agenda, unsettling some investors.

In the U.S., the S&P 500 and Nasdaq indexes reached record highs on Wednesday. Nvidia, driven by the AI boom, surpassed a market valuation of $3 trillion, overtaking Apple as the world's second-most valuable company. The May private payrolls report indicated a softening labor market, aligning with earlier data showing a drop in job openings in April to a three-year low.

Market sentiment has shifted significantly due to labor data this week, with traders now pricing in 49 basis points of Fed cuts this year and a 69% probability of a September rate cut, up from 47.5% last week, according to the CME FedWatch tool. Investors are now focused on the nonfarm payroll report for May, with economists forecasting an increase of 185,000 jobs.

In the bond market, benchmark 10-year note yields stood at 4.2929% during Asian trading hours, having fallen to a low of 4.2750% on Wednesday, the lowest since April 1.

The dollar weakened broadly, with the yen strengthening to 155.445 per dollar, close to a two-week high. The euro rose 0.2% to $1.089025, nearing a two-and-a-half month high ahead of the ECB meeting. The ECB is expected to cut interest rates and signal progress against inflation, while indicating that the battle is not over. Markets are pricing in 64 basis points of ECB cuts this year.

In commodities, Brent crude futures rose 0.48% to $78.79 per barrel, while U.S. West Texas Intermediate crude futures climbed 0.66% to $74.55.

The Bank of Canada became the first G7 country to trim its key policy rate on Wednesday, signaling gradual further easing contingent on data.

As global markets react to central bank policies and economic data, volatility is expected to persist, with investor focus remaining on upcoming economic projections and policy reviews.

(By Commoditiescontrol Bureau: 09820130172)


       
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