European and US futures rose alongside Asian stocks, following a buoyant session on Wall Street amid bets the Federal Reserve will soon signal it’s ready to start cutting interest rates.
MSCI’s all-country stock index headed for a ninth day of increases — the longest run of gains since December. Shares advanced in Japan, South Korea and Australia while those in China slipped. Euro Stoxx 50 and US futures rose, while Treasury 10-year yields were steady.
The bullish momentum was fueled by an upbeat mood in the US, where the S&P 500 climbed for an eighth straight day. A gauge of Asian currencies touched the highest since January, while oil extended the biggest drop in two weeks as the US said Israel accepted a cease-fire proposal in Gaza.
Bets for imminent Fed easing are propping up equity markets, with investor allocations still robust despite a bout of recent volatility and heightened uncertainty around the economy. The MSCI Asia Pacific Index has gained in all but two sessions since Aug. 6, underscoring expectations that US policymakers are likely to cut interest rates in September.
“What we’ve seen happen is a swath of recent data, which has eased fears about slowing US growth without stoking fears of re-accelerating inflation,” said Kyle Rodda, a senior market analyst at Capital.Com Inc. That’s benefiting Asia ex-Japan equities, “with a weaker dollar supporting financial conditions and risk appetite,” he added.
Over in Europe, increasing risks to the growth outlook have reinforced the case for a policy adjustment when the European Central Bank meets next month, according to Governing Council member Olli Rehn. Investors will also be focused on the euro-zone CPI out later today.
Copper trimmed its recent rebound and gold was in record-setting form, topping $2,500 an ounce on expectations that the Fed is poised to cut interest rates. The yen slipped to hover around 147 per dollar.
Back in Asia, Australia’s central bank signaled it will likely need to hold interest rates at their current 12-year high for an “extended period” to ensure that inflation returns to its target band next year. Meanwhile, Chinese banks kept their benchmark lending rates unchanged for August, as profit margins came under pressure and policymakers focused on the health of financial institutions.
Stock volume has been trending lower since the trading surge during the early-August selloff with traders reluctant to place big bets ahead of the Fed’s Jackson Hole economic symposium this week. Central bankers gathering for one of the world’s most prominent annual economic forums are set to find themselves more divided than perhaps any time since before the pandemic.
“Markets are noticing that more Fed speakers are increasingly dovish, they’re recalling economic data of late supports Fed cuts,” said Jessica Amir, a market strategist at Moomoo. “This runway sets markets up for a ‘hole in one’ at Jackson Hole, anticipating the Fed Reserve Chair to potentially flag incoming rate cuts.”
On the corporate front, Alimentation Couche-Tard Inc.’s preliminary proposal to buy 7-Eleven owner Seven & i Holdings Co. could be worth more than ¥5.63 trillion ($38.4 billion), based on the Japanese company’s market value after news of the potential deal was disclosed.