SYDNEY, Sept 23 (Askume) – Asian shares were firm on Monday as the central bank was expected to cut interest rates twice more at its meeting, while key inflation data from the United States was expected to raise the prospect of further easing.
A few days ago, China’s central bank disappointed markets by not cutting long-term interest rates, but surprised many by cutting the 14-day repo rate by 10 basis points. This helped Chinese blue-chip stocks (.CSI300) rise 0.5%.
MSCI’s broadest index of Asia-Pacific shares outside Japan (.MIAPJ0000PUS) rose 0.2% after rising 2.7% last week in reduced trade due to a holiday in Japan.
Tokyo’s Nikkei (.N225) fell, but futures were trading at 38,530 points and spot trading at 37,723. The index rose 3.1% last week as the yen moved away from record highs and the Bank of Japan (BOJ) signaled it was in no hurry to tighten policy further.
Eurostoxx 50 futures rose 0.3% and FTSE futures rose 0.1%.
S&P 500 futures rose 0.3% and Nasdaq futures rose 0.5%. The S&P is up 1% so far in September, the weakest month on record for stocks, and is up 19% so far this year, hitting a record high.
More than 20 billion shares changed hands on US exchanges on Friday, the busiest trading day since January 2021. Bank of America analysts pointed out that if there is no economic recession within 12 months after the Federal Reserve starts cutting interest rates, the S&P index will rise by an average of 21%.
The market is still bullish on a half basis point rate cut by the Federal Reserve, with futures trading giving a 50% probability of another significant rate cut in November.
“While the move has been widely applauded, its significance cannot be overstated given the Fed’s role in global dollar liquidity conditions,” said Barclays economist Christian Keller.
“What we’re seeing is that the Fed is starting this cycle with a 50 basis point move without any financial crisis or any real job losses, which is very unusual,” he said. This is a sign of a deterioration in labor market conditions, or in market terms: get a soft landing.
At least nine Fed policymakers are scheduled to speak this week, including prepared remarks from Chairman Powell, two governors and New York Fed President John Williams.
More cuts
Much will depend on the performance of the Fed’s favorite inflation gauge, core personal consumption expenditures (PCE), on Friday. Analysts expect a 0.2% increase month-on-month, bringing the annual rate to 2.7%, while the overall index is expected to fall to just 2.3%.
The coming week will also include surveys on global manufacturing, US consumer confidence and durable goods.
The Swiss National Bank held a meeting on Thursday and the market is all set to cut interest rates by 25 basis points to 1.0%. The probability of a 50 basis point cut in interest rates is 41%.
The Riksbank will meet on Wednesday and is expected to cut interest rates by 25 basis points, or possibly more.
One bank not easing policy is the Reserve Bank of Australia (RBA), which meets on Tuesday and is expected to almost certainly keep interest rates steady at 4.35% as inflation remains stubbornly high. (#0#rbawatch>
Investors are also paying close attention to ongoing negotiations to avert a U.S. government shutdown, as there are just days left before the current $1.2 trillion funding bill expires on Sept. 30. U.S. House Speaker Mike Johnson , a Republican, introduced a three-month temporary funding bill on Sunday, but that must now be voted on.
In the currency market, the dollar rose 0.3% against the yen to 144.35 yen, up 2.2% from last week’s low of 139.58 yen. The euro rose nearly 3% against the yen last week to 161.09 yen, while the dollar was steady at $1.1160 against the yen.
Japan’s Liberal Democratic Party, which has a majority in parliament, will elect a new leader on September 27 and the winner will replace outgoing Prime Minister Fumio Kishida.
Gold is at $2,620 an ounce, slightly below its all-time high of $2,625.59, on the back of US interest rate cuts and lower bond yields.
Net long positions in COMEX gold futures rose to their highest level in four years last week, indicating some near-term downside risks.
Oil prices strengthened further, rising nearly 4% last week, as lower borrowing costs will support global economic growth and demand.
Brent crude rose 40 cents to $74.89 a barrel, while US crude rose 39 cents to $71.39 a barrel.
