MSCI’s broadest index of Asia-Pacific shares outside Japan reached a one-month high before giving up some gains to trade 0.23% higher
Asian stocks scaled a one-month high on Tuesday, tracking a Wall Street rally driven by expectations that the Fed could offer further hints of imminent rate cuts later this week.
With the data calendar relatively light across major economies this week, all eyes are on Wednesday’s release of the Fed’s July meeting minutes and Chair Jerome Powell’s speech at Jackson Hole on Friday for hints on the outlook for U.S. rates.
MSCI’s broadest index of Asia-Pacific shares outside Japan reached a one-month high before giving up some gains to trade 0.23% higher.
U.S. stock futures similarly gained, with S&P 500 futures 0.02% higher while Nasdaq futures added 0.12%.
EUROSTOXX 50 futures advanced 0.1%, though FTSE futures declined 0.32%.
Fed policymakers have in recent days indicated a potential rate cut in September, priming markets for a similar tone from Powell and other speakers at the annual meeting of global central bankers and other policymakers in Jackson Hole, Wyoming.
Should they acknowledge the U.S. economy’s disinflation path, it will confirm a September rate cut, according to Thierry Wizman, global FX and rates strategist at Macquarie.
Markets will likely turn on the extent to which Powell opens the door for the possibility of a 50 bps cut at one of the next three FOMC meetings, Wizman added.
In Asia, Japan’s Nikkei reached its highest level in more than two weeks and traded 1.9% higher, but Chinese blue-chips declined 0.7% on continued concerns over its gloomy economic outlook. Hong Kong’s Hang Seng Index declined 0.36%.
China’s benchmark lending rates were left unchanged as expected on Tuesday, drawing a muted market reaction.
The expectations of a dovish Fed outcome this week left the dollar struggling at a more than seven-month low against the euro, which peaked at $1.108775 on Tuesday. Sterling stayed near a one-month high and bought $1.2978.
The dollar index was last slightly up at 101.94, having declined to its lowest since early January of 101.76 earlier in the session.
Against the yen, the dollar gained 0.27% to 146.99, with traders also looking to BoJ Governor Kazuo Ueda’s appearance in parliament on Friday, where he is set to discuss the central bank’s decision last month to raise interest rates.
The BoJ’s hawkish tilt had injected huge volatility into markets as investors aggressively unwound yen-funded carry trades, impacting stocks globally.
The market turmoil has since abated after BoJ Deputy Governor Shinichi Uchida earlier this month played down the possibility of further rate hikes in the near term.
With markets calming, Ueda may change tack and return to talking about normalising interest rates, according to Joseph Capurso, head of international and sustainable economics at Commonwealth Bank of Australia.
In Australia, the RBA judged a near-term rate cut was unlikely and policy might need to stay restrictive for an “extended period” to ensure inflation can be tamed, according to minutes of the central bank’s August meeting out on Tuesday.
