Asian markets displayed cautious optimism on Thursday, with most indices showing modest gains as investors increasingly anticipate a potential Federal Reserve rate cut in September. This sentiment was bolstered by the release of the Fed’s July meeting minutes, which suggested that several members have considered lowering interest rates. The revised US employment data, showing 818,000 fewer jobs added than initially forecast in the year through March 2024, has further strengthened the case for monetary easing.Japan’s Nikkei 225 rose 0.6% to 38,190.85, while Australia’s S&P/ASX 200 gained 0.2% to 8,029.40. Hong Kong’s Hang Seng edged up 0.5%, but mainland Chinese markets showed weakness with Shanghai’s composite index falling 0.1%. European futures indicated a slightly negative opening.The anticipation of a rate cut has also impacted currency markets, with the index for emerging market currencies reaching a record high. The US dollar weakened, with the dollar index at 101.1.However, market participants remain cautious ahead of Federal Reserve Chair Jerome Powell’s speech at the annual Jackson Hole economic symposium on Friday. Thomas Altmann of QC Partners noted, “The fear of being on the wrong side is simply enormous right now,” highlighting the current low trading volumes.Investors are looking to Powell’s speech for clearer signals about the timing and magnitude of potential rate cuts. The market is currently pricing in an 85% chance of a 100 basis point rate cut by the end of the year, with some analysts even suggesting the possibility of a 50 basis point cut in September.
Key points
- Asian markets showed cautious gains as investors anticipate a potential Fed rate cut in September.
- Revised US employment data, showing 818,000 fewer jobs added, strengthens the case for monetary easing.
- Market participants are eagerly awaiting Jerome Powell’s speech at the Jackson Hole symposium for clearer policy signals.
Contradictions👾While most Asian markets showed gains, Chinese mainland markets experienced slight declines.
