MSCI’s broadest index of Asia-Pacific shares outside Japan added 0.35% and was on track to add more than 3% for the month, its best performance since February
Asian stocks were on track for a fifth consecutive month of gains on Friday, bolstered by a growing view that easing U.S. inflation could prompt the Fed to reduce rates this year, while the yen slipped to a 38-year low against the dollar.
Friday is packed with risk events for markets following a relatively subdued week, with figures for May’s U.S. core PCE price index taking centre stage later in the day.
Asian markets were little fazed by the first U.S. presidential debate between Democratic President Joe Biden and his Republican rival Donald Trump ahead of the November election, though U.S. stock futures and the dollar gained as investors narrowed the odds on a Trump win.
There is a big debate on whether that would be good news or bad news for equity markets, but I can tell you that for bond markets, the consensus is clear. If Trump were to win the election, interest rates would likely increase, according to Andrew Lilley, chief interest rate strategist at Barrenjoey.
S&P 500 futures and Nasdaq futures both rose, advancing 0.2% and 0.32%, respectively.
EUROSTOXX 50 futures added 0.22%, while FTSE futures gained 0.24%.
MSCI’s broadest index of Asia-Pacific shares outside Japan added 0.35% and was on track to add more than 3% for the month, its best performance since February.
Growing expectations that the Federal Reserve will ease policy soon and momentum from the AI boom have triggered a risk rally across stock markets and lifted Wall Street to record peaks.
Traders are now pricing in a 64% probability of a first Fed cut in September, up from 50% a month back, shows the CME FedWatch tool, though analysts said those expectations could be derailed if Friday’s core PCE numbers surprise to the upside.
If tonight’s core PCE inflation were to come in much higher than the 2.6% expected and after upside surprises to Canadian and Australian inflation numbers this week, it would inflame concerns that the drop in global inflation has bottomed out and may have reaccelerated in some countries, said Tony Sycamore, a market analyst at IG.
Chinese markets, meanwhile, reversed early losses to trade higher, with China’s benchmark CSI300 up 0.72%. Hong Kong’s Hang Seng Index added 0.57%.
In currency markets, the dollar was on the front foot and was eyeing a monthly gain of 1.3% against other major currencies.
The Aussie dropped 0.35% to $0.6624, while the euro slipped 0.13% to $1.0690 and was set for a monthly decline of around 1.4%.
The euro continues to be weighed by political turmoil in the bloc, with France’s snap election due to kick off this weekend.
