Equities firm after benign US CPI data reinforces the hope the Fed will cut rates in September
15 August 2024 - 09:31
byKevin Buckland
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A man walks past an electronic screen outside a brokerage in Tokyo, Japan March 21, 2024. File photo: REUTERS
Tokyo — Asian stocks were firm on Thursday while the dollar remained on the back foot amid lower US treasury yields after benign consumer inflation data overnight reinforced bets for the Federal Reserve to start cutting interest rates in September.
Regional markets took their lead from gains on Wall Street, with Japan's Nikkei rising 0.8% by 5.40am GMT and Australia’s stock benchmark up 0.14%.
Japanese stocks got extra impetus from data showing the economy rebounded strongly in the second quarter.
Chinese blue chips added 0.7%, getting additional support from the expectation for more stimulus from Beijing amid another batch of lacklustre economic data. Hong Kong's Hang Seng , however, slipped 0.2%.
US S&P 500 futures pointed 0.16% higher after the cash index advanced 0.4% on Wednesday, buoyed by the slowest rise in the consumer price index in more than three years. Pan-European Stoxx 50 futures rose 0.38%.
“The report ‘checked the box’ for the Fed to start cutting rates in September,” TD Securities analysts wrote in a report.
“Our view is that the Fed will kick-start the easing cycle with a 25bp cut in September, but a 50 basis point [bp] reduction is not completely off the table.”
The dollar remained weak after slumping overnight to its lowest level to the euro since the end of 2023. The single currency traded flat at $1.1012 after reaching $1.10475 in the previous session.
The 10-year treasury yield ticked up slightly to 3.83% in Asian hours, after dipping to as low as 3.811% on Wednesday.
“The [dollar] looks cheap to the global risk events piling up,” the TD analysts said. “We are cautious of a correction and generally continue to favour long USD.”
Traders remain convinced that the Fed will reduce rates on September 18 for the first time in four-and-a-half years, but are split on whether policymakers will opt for a supersized 50bp reduction. While inflation is slowing, signs it may remain sticky spurred a reduction of bets on a larger cut to 37.5% from about 50% a day earlier.
A major macroeconomic test looms later on Thursday with the release of US retail sales figures.
“If we were to see a negative retail control sales number, it would likely set alarm bells ringing, given the market's recent concerns about a recession in the US,” said Tony Sycamore, a market analyst at IG.
The dollar eased 0.1% to ¥147.12 as the pair continued its weeklong consolidation around the ¥147 mark.
Sterling remained depressed after softer-than-expected UK inflation figures hinted at faster, deeper Bank of England rate cuts. The currency edged up 0.1% to $1.2843 after sagging 0.3% on Wednesday.
The Australian dollar advanced 0.36% to $0.6620, erasing early losses after a surprise surge in employment helped offset weakness in key commodity prices.
Gold edged up 0.2% to $2,453/oz after Wednesday’s 0.7% dive.
Oil prices trod water following the previous day’s losses, following an unexpected rise in US crude inventories.
Brent crude futures were flat at $79.81 a barrel, while US West Texas Intermediate crude edged up 0.1% to $77.06. Both benchmarks fell more than 1% on Wednesday.
Support our award-winning journalism. The Premium package (digital only) is R30 for the first month and thereafter you pay R129 p/m now ad-free for all subscribers.
Asian shares stronger as dollar slips
Equities firm after benign US CPI data reinforces the hope the Fed will cut rates in September
Tokyo — Asian stocks were firm on Thursday while the dollar remained on the back foot amid lower US treasury yields after benign consumer inflation data overnight reinforced bets for the Federal Reserve to start cutting interest rates in September.
Regional markets took their lead from gains on Wall Street, with Japan's Nikkei rising 0.8% by 5.40am GMT and Australia’s stock benchmark up 0.14%.
Japanese stocks got extra impetus from data showing the economy rebounded strongly in the second quarter.
Chinese blue chips added 0.7%, getting additional support from the expectation for more stimulus from Beijing amid another batch of lacklustre economic data. Hong Kong's Hang Seng , however, slipped 0.2%.
US S&P 500 futures pointed 0.16% higher after the cash index advanced 0.4% on Wednesday, buoyed by the slowest rise in the consumer price index in more than three years. Pan-European Stoxx 50 futures rose 0.38%.
“The report ‘checked the box’ for the Fed to start cutting rates in September,” TD Securities analysts wrote in a report.
“Our view is that the Fed will kick-start the easing cycle with a 25bp cut in September, but a 50 basis point [bp] reduction is not completely off the table.”
The dollar remained weak after slumping overnight to its lowest level to the euro since the end of 2023. The single currency traded flat at $1.1012 after reaching $1.10475 in the previous session.
The 10-year treasury yield ticked up slightly to 3.83% in Asian hours, after dipping to as low as 3.811% on Wednesday.
“The [dollar] looks cheap to the global risk events piling up,” the TD analysts said. “We are cautious of a correction and generally continue to favour long USD.”
Traders remain convinced that the Fed will reduce rates on September 18 for the first time in four-and-a-half years, but are split on whether policymakers will opt for a supersized 50bp reduction. While inflation is slowing, signs it may remain sticky spurred a reduction of bets on a larger cut to 37.5% from about 50% a day earlier.
A major macroeconomic test looms later on Thursday with the release of US retail sales figures.
“If we were to see a negative retail control sales number, it would likely set alarm bells ringing, given the market's recent concerns about a recession in the US,” said Tony Sycamore, a market analyst at IG.
The dollar eased 0.1% to ¥147.12 as the pair continued its weeklong consolidation around the ¥147 mark.
Sterling remained depressed after softer-than-expected UK inflation figures hinted at faster, deeper Bank of England rate cuts. The currency edged up 0.1% to $1.2843 after sagging 0.3% on Wednesday.
The Australian dollar advanced 0.36% to $0.6620, erasing early losses after a surprise surge in employment helped offset weakness in key commodity prices.
Gold edged up 0.2% to $2,453/oz after Wednesday’s 0.7% dive.
Oil prices trod water following the previous day’s losses, following an unexpected rise in US crude inventories.
Brent crude futures were flat at $79.81 a barrel, while US West Texas Intermediate crude edged up 0.1% to $77.06. Both benchmarks fell more than 1% on Wednesday.
Reuters
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