Traders work on the floor of the New York Stock Exchange (NYSE) in New York, U.S., on Friday, 12 October 2018. (Photo: Michael Nagle/Bloomberg) The MSCI Asia-Pacific gauge hit its highest point in over two years, with technology shares contributing the most to the rally. Japan’s Topix hit a record intraday high and equities in South Korea, Australia and China also advanced. US futures contracts were little changed after the S&P 500 and Nasdaq 100 hit records in a shortened session ahead of a US holiday.
The yen strengthened after once again touching its lowest level since 1986 against the greenback in the previous session. Speculation persists that the Bank of Japan will tighten policy only gradually.
Global stocks are on course for their longest stretch of weekly gains since March on the back of a string of soft economic data in the US, which has brought the idea of September rate cuts back on table. On Wednesday, reports showed the American services sector contracted at the fastest pace in four years, while the labour market saw further signs of softening.
“Weaker Treasury yields and a dip in the US dollar on dovish rate bets may be supportive of risk sentiments across the region,” said Jun Rong Yeap, market strategist at IG Asia Pte. The “slowing US growth prospects” are making a September rate cut “more likely than not,” he said.
Minutes from the Fed’s June policy meeting showed officials were awaiting evidence that inflation is cooling and were divided on how long to keep rates elevated. Swap traders projected almost two rate cuts in 2024, with the first in November — though bets on a September reduction increased.
“Bad news is good news,” said Fawad Razaqzada at City Index and Forex.com. “That’s how risk assets reacted in the aftermath” of Wednesday’s US data.
Treasury 10-year yields were steady after dropping seven basis points to 4.36% in the prior session, which weighed on an index of dollar strength.
Elsewhere in Asia, Chinese electric-car brands held on to their share of the slumping European EV market in May. Automakers like BYD Co. made up 8.7% of total EV sales, roughly on par with a year ago, as Chinese firms pressure European counterparts with new, inexpensive models.
Meanwhile, Britons prepared to head to the polls in a general election on Thursday. The pound was little changed in early Asian trading.
Investors will now keep a close eye on Friday’s US jobs report. Economists anticipate a 190,000 gain in June nonfarm payrolls — less than the previous month — with the unemployment rate holding at 4%.
“Given other evidence of a cooling economic backdrop, the payroll report could be increasingly decisive for the Fed as it seeks a rationale to signal an easing of rates,” said Quincy Krosby at LPL Financial.
Chicago Fed President Austan Goolsbee said there’s still a lot of data the US central bank needs to see before gaining the confidence to cut interest rates.
Separately, traders are watching for indications if President Joe Biden will drop out of the US presidential race. Wall Street has started shifting money to and from the dollar, Treasuries and other assets that would be impacted if his rival Donald Trump returns to office.
In commodities, gold gained for a second day after breaking out of a days-long tight trading range.