Asian stocks followed Wall Street's lead higher on Thursday. Japan’s benchmark Topix index was set for a 34-year high. Australian, South Korean and Chinese stocks surged. The moves follow a downbeat day in the prior session when a gauge of the region’s stocks fell for the first time in three days. Contracts for US equities rose.
President Joe Biden and former President Donald Trump faced off in their first 2024 debate late on Thursday in the US. The dollar and Bitcoin rose as the debate got going, and the yen weakened past 161 to the greenback, its lowest levels since 1986 — though they all pared or erased the moves through the course of the debate.
Treasuries retreated, paring gains from the prior session, when lacklustre US economic data reinforced speculation the Fed will cut interest rates this year to prevent a bigger slowdown in the economy.
The US government marked down personal spending to an annualised 1.5% in the first quarter. Separate releases showed declines in orders and shipments of certain business equipment, weakness in the job market and a slide in homebuying.
“We expect both consumer and business activity to slow in the latter half of 2024, giving the Fed ample opportunity to begin cutting rates later this year,” said Jeff Roach, chief economist at LPL Financial.
Meanwhile, India is preparing itself for the inclusion of the nation’s government bonds into a JPMorgan Chase & Co. emerging markets index on Friday, opening up a $1.3-trillion market to a broader range of investors.
One rate cut
Fed Bank of Atlanta president Raphael Bostic said he continues to expect one rate reduction this year amid signs inflation has resumed its decline. His projection echoes that of the Federal Open Market Committee.
Swaps markets are pricing in about 45 basis points of easing in 2024, which would equate to less than two cuts.
Economists expect data on Friday to show that the Fed’s preferred gauge of underlying inflation slowed to an annualised rate 2.6% last month from 2.8%. While that’s the lowest reading since March 2021, it remains above the Fed’s goal for 2% inflation.
“A consensus move would conform with the narrative that the early-2024 deflationary pressures are fading, and the cooling trend seen during the second half of 2023 has once again resumed in the second quarter,” said Ian Lyngen and Vail Hartman at BMO Capital Markets. “Perhaps more importantly, investors are anticipating a round of inflation data that offers incremental support for a September rate cut.”
In Japan, the yen strengthened below 161 per dollar after the Nikkei Shimbun reported that Atsushi Mimura has been appointed as the new vice finance minister for international affairs, making him the face of official efforts to manage the yen as Masato Kanda steps down.
The Mexican peso fell against the dollar, before clawing back some ground. Traders will be parsing clues from the US presidential debate as well as comments from Banco de Mexico’s Governor Victoria Rodriguez that a decrease in volatility is one of the elements that has opened the door for the central bank to consider interest rate cuts.
In late New York trading, Nike sank as sales missed estimates. Walgreens Boots Alliance tumbled 22% in regular hours after slashing its guidance.