Asia stocks soar amid growing US rate cut bets.
Most Asian stocks rose on Monday, tracking gains in Wall Street after dovish signals from the Federal Reserve ramped up bets that interest rate cuts were coming in the next month.
Chinese and Hong Kong stocks were the best performers in the region, as they benefited from a rally in local technology and artificial intelligence stocks.
S&P 500 Futures fell 0.1% in Asian trade, steadying after the S&P 500 surged 1.5% on Friday. Wall Street’s rally was sparked chiefly by Fed Chair Jerome Powell signaling more openness to cut interest rates, amid concerns over a cooling labor market. But Powell still signalled caution over cutting rates due to an uncertain outlook for inflation.
Markets were seen ratcheting up bets on a 25 basis point cut in September following Powell’s statement, CME Fedwatch showed.
China stocks soar; chipmakers rally on self reliance bets, Nvidia scrutiny
China’s Shanghai Shenzhen CSI 300 and Shanghai Composite indexes rose 1.3% and 1%, respectively, while Hong Kong’s Hang Seng index rallied as much as 2.2%.
The CSI300 reached its highest level since mid-2022, while the Shanghai Composite was near a 10-year high. Both indexes rallied sharply in August on increasing optimism towards the Chinese economy, as U.S. trade ties improved and as local growth stabilized.
Gold prices cool after rallying.
Gold prices fell slightly in Asian trade on Monday, losing some ground after rising sharply on dovish comments from Federal Reserve Chair Jerome Powell, which saw markets ramp up bets on interest rate cuts.
Buying in the yellow metal was curtailed chiefly by broader flows into more risk-driven assets, as investors speculated over lower U.S. interest rates. While gold and other metals did benefit from weakness in the dollar, their gains since Friday proved to be short-lived.
Gold encouraged by rate cut talk, but risk-on rally limits gains
Demand for havens was limited as traders piled into risk-driven assets en masse. Wall Street rallied on Friday, while Asian stock markets clocked sharp gains on Monday.
Dollar struggles to recover.
The U.S. dollar attempted on Monday to pull itself up from a four-week low on the euro after a dovish pivot from Federal Reserve Chair Jerome Powell sent it tumbling more than 1%.
The U.S currency added 0.1% to $1.1705 per euro, but remained within striking distance of Friday’s low at $1.174225, a level not seen since July 28.
It edged up 0.1% to $1.3509 versus sterling, following a 0.8% slide in the prior session, and rose 0.3% to 147.26 yen, clawing back part of Friday’s 1% tumble.
The risk-sensitive Australian dollar briefly leapt to a one-week high of $0.6523 on Monday before pulling back to trade little changed at $0.6490. In the previous session, it surged 1.1%.
Powell in a closely watched speech at the Fed’s annual Jackson Hole symposium on Friday opened the door to an interest rate cut at the central bank’s meeting next month.
“Downside risks to employment are rising,” he told an audience of international economists and policymakers. “And if those risks materialize, they can do so quickly.”
Traders are now pricing in 84% odds of a quarter-point rate cut on September 17, and a cumulative 53 basis points of reductions by year-end, according to LSEG data.
Traders had ramped up bets on a September cut early this month after an unexpectedly weak monthly payrolls report, but hotter-than-expected producer price inflation and strong business activity surveys forced a paring back in the run-up to Jackson Hole.
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