Asian stocks hit 27-month high on weaker dollar By Investing.com

Asian stocks hit 27-month high on weaker dollar By Investing.com
Asian stocks hit 27-month high on weaker dollar By Investing.com

In a notable shift in financial markets, Asian stocks hit a 27-month high today, boosted by expectations of a potential interest rate cut by the U.S. Federal Reserve in September. The anticipation follows weaker U.S. data, which pushed bonds and commodities higher while weakening the dollar.

The narrow trading was partly due to a public holiday in the United States. Meanwhile, investors are closely watching the British political scene, where the Labour Party is expected to score a significant victory over the Conservative Party.

CBA analysts noted that Labour’s plans are relatively modest in terms of tax and spending, aimed at reducing the UK’s large budget deficit and bringing the country closer to the European Union.

Across the Channel, the French elections are also in focus, with traditional parties expected to prevent the National Rally from securing a majority in next Sunday’s polls.

In Asian markets, MSCI’s broadest index of Asia-Pacific shares outside Japan rose 0.7%, marking its highest level since April 2022. Japan’s Nikkei rose 0.4%, nearing its March peak, while the broader index hit all-time highs. Futures for the and Nasdaq were flat, holding their record highs after the release of weak economic data.

The U.S. ISM index of services activity fell to its lowest level since mid-2020, highlighting weak employment ahead of the June payrolls report due Friday. While the services PMI survey showed some strength, both surveys indicated that inflationary pressures may be easing.

Citi’s US Economic Surprise Index fell to -47.5, its lowest level since August 2022, and the Atlanta Fed’s GDPNow forecast was cut from 1.7% to just 1.5%. These developments suggest a slowdown in the economy, which is in line with the Fed’s desire to get more evidence before considering a rate cut.

Market expectations for a September rate cut rose to 74%, with a total of 47 basis points of easing expected this year. Yields on 10-year Treasury notes fell 8 basis points to 4.355%.

The dollar’s decline benefited other currencies, with the euro rising to $1.0793 and the Australian dollar hitting a six-month high of $0.6733. The yen, however, continued to weaken, with the dollar trading at 161.40 yen after hitting 161.96, a 38-year high.

Commodity prices were also hurt by the falling dollar, with gold climbing back to $2,358 an ounce. Oil prices, on the other hand, edged lower, with Brent falling to $87.03 a barrel and US crude to $83.55 a barrel, despite a recent surge in demand signalled by a sharp drop in US crude inventories.

Reuters contributed to this article.

This article was generated and translated with the help of AI and reviewed by an editor. For more information, see our T&C.

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