Asian stocks extend global rally, Nikkei stands out amid yen gains
The Federal Reserve kept interest rates steady overnight but opened the door for a cut in September.
Asian shares rose on Thursday, driven by a huge rally in global technology stocks, helped by Meta and Nvidia, while prospects of imminent US policy easing boosted global bonds and commodities.
The Federal Reserve kept interest rates unchanged overnight but opened the door to a cut in September, leaving traders betting the Bank of England would cut rates later in the day, with a 60 percent probability.
The yen extended its blockbuster rally, rising another 0.8 percent to a 4-1/2-month high of 148.82 per dollar after surging as much as 1.8 percent overnight. The Bank of Japan raised interest rates for the second time in 17 years on Wednesday and signaled more tightening was coming.
MSCI’s broadest index of Asia-Pacific shares outside Japan rose 0.7 percent after ending July largely flat. A regional MSCI IT index jumped 2.0 percent and Taiwan’s shares rose 1.7 percent.
However, Japan’s Nikkei fell 3 percent as the stronger yen hurt the outlook for Japanese exporters.
Chinese blue chips fell 0.3 percent after a private survey showed China’s manufacturing sector unexpectedly shrank in July, a bad omen for the country’s growth.
On Wall Street, tech stocks are making an extraordinary comeback after the recent sell-off. Nasdaq futures rose 1 percent in Asia, while shares of Facebook parent Meta Platforms rose 7 percent after the earnings call. S&P 500 futures also rose 0.5 percent.
Apple and Amazon.com are scheduled to report earnings later Thursday. Nvidia has already rebounded, adding about $330 billion to its market capitalization on Wednesday.
Also helping the global risk rally are Fed Chairman Jerome Powell’s dovish comments that policymakers had a “real discussion” about spending cuts at their July meeting. The central bank also said the risks to employment were now equal to those from rising prices.
As a result, markets, which were already betting that a September rate cut was a foregone conclusion, are betting on a 10 percent chance that the Fed will ease rates by 50 basis points in September.
“We believe the bar is not high for the FOMC to ease policy at its next meeting,” analysts at TD Securities said in a note to clients.
“While we believe the bar is high for the Fed to cut rates by 50 basis points in September, we cannot abandon the Fed’s accommodative policy at each of the last three meetings of 2024 if inflation remains better than expected.”
Treasuries rose to their highest level since the first quarter. The yield on 10-year Treasuries rose 2 basis points to 4.037 percent, after falling 11 bps overnight.
The dollar’s decline against a surging yen dragged down its broader value against a range of currencies. The dollar index fell 0.2 percent to 103.87 against its main peers on Thursday, after falling 0.4 percent overnight.
On commodity markets, oil prices rose further overnight after the killing of a Hamas leader in Iran raised the threat of a wider conflict in the Middle East. (O/R)
Brent crude futures rose 0.7 percent to $81.44 a barrel, while U.S. West Texas Intermediate crude futures rose 0.9 percent to $78.61 a barrel.
They were both up about 4 percent in the previous session.
Gold rose 0.4 percent to $2,456.59 an ounce. (GOL/)
(Only the headline and image of this report may have been edited by Business Standard staff; the rest of the content is auto-generated from a syndicated feed.)
First print: Aug 01, 2024 | 08:34 AM IST