Asian stocks edged closer to their highest levels in two-and-a-half years on Tuesday and the U.S. dollar strengthened following upbeat comments from Federal Reserve Chairman Jerome Powell that derailed bets on deep policy cuts. interest rates, while tensions in the Middle East kept risk sentiment in check.
Oil prices remained steady and gold traded just below a record high set last week, as investors await U.S. jobs data for more clarity on the pace of US rate cuts.
MSCI’s broadest index of Asia-Pacific shares outside Japan was down 0.13% at 620.05 on Tuesday, just below a two-and-a-half-year high of 627.66 hit on Monday. The index is up 17% since the start of the year.
Japan’s Nikkei rose 1.5% in early trade after losing 4.8% on Monday, as investors faced the victory of Shigeru Ishiba, seen as a monetary policy hawk, in the race for the top job. minister of the country. [.T]
Japanese stocks were supported by a softer yen which held at 144.09 per dollar in early trade. [FRX/]
With mainland China’s financial markets closed for the rest of the week, the meteoric rally that has buoyed Asian markets over the past week is expected to run out of steam. Hong Kong’s Hang Seng is also closed on Tuesday.
A series of economic stimulus measures has sent Chinese stocks soaring, whose benchmark CSI300 index is up 25% since the start of last week, as global investors prepare to place their bets on China again .
“I think we’re going to see some choppy trading until the U.S. data starts rolling in,” said Matt Simpson, senior market analyst at City Index, noting that volume is low with Chinese markets closed.
NO REPAIR
Investor attention has been focused on the pace of Fed rate cuts after the U.S. central bank launched an easing cycle last month with a 50 basis point cut.
Fed Chairman Powell indicated on Monday that the U.S. central bank would likely stick to quarter-percentage-point cuts in the future, after new data boosted confidence in the economic growth and consumer spending.
“This is not a committee that feels like it’s in a hurry to cut rates quickly,” Mr. Powell said.
That led traders to give a 38% chance of a 50 basis point cut next month, up from 53% on Friday, according to the CME’s FedWatch tool. Operators anticipate an easing of 70 basis points this year.
Shifting expectations for rate cuts supported the dollar, with the dollar index slightly above 100.77. The euro remained stable at $1.11355.
“As usual, Mr. Powell does not allow himself to be swayed by market prices,” said Mr. Simpson of City Index. “And saying the cuts are not preordained should serve as a warning to dollar bears, given that the data has generally surprised to the upside in recent weeks.”
With the Fed currently focused on the labor market, Tuesday’s data on job openings for August and the ISM manufacturing survey for September will be important for rate forecasts and the dollar, a said Commonwealth Bank of Australia economist Kristina Clifton.
“The dollar can remain strong if this week’s data shows the U.S. labor market remains in reasonable shape.
In commodities, oil prices remained steady on Tuesday as the prospect of additional supply amid lackluster global demand growth offset concerns over escalating conflict in the Middle East that could disrupt exports in the main producing region.
Brent oil futures rose 0.11% to $71.78 a barrel. West Texas Intermediate crude oil futures gained 0.07% to $68.22 a barrel. [O/R]
Spot gold was up 0.11% at $2,637.56 an ounce, not far from Thursday’s record high of $2,685.42. Gold rose 13% between July and September, its best quarterly performance in more than four years.
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