Asian markets experienced a boost on Thursday, driven by a tech-led rally on Wall Street. The dollar extended its gains following a slight upside surprise in U.S. core inflation data, which reduced expectations for a significant rate cut by the Federal Reserve next week.
Investors are now focused on the upcoming European Central Bank (ECB) policy decision, with a rate cut anticipated. The key question is whether the ECB will take further action in October and December. Ahead of this event, European markets are poised for strong gains, with EUROSTOXX 50 futures climbing 1.3% and FTSE futures rising 1.1%. Nasdaq futures also advanced by 0.3%.
In Asia, MSCI’s broad index of shares outside Japan surged 1.5%, while the Nikkei index jumped 3.3%, buoyed by a weaker yen that retreated from its 2024 high of 140.71 yen per dollar. The dollar gained 0.3% to 142.75 yen, pressured earlier by hawkish remarks from a senior Bank of Japan official advocating for a rate increase.
U.S. core consumer price index (CPI) data revealed a 0.28% increase in August, slightly above the expected 0.2%, which led markets to nearly dismiss the prospect of a half-point rate cut by the Federal Reserve next week. The probability for such a cut now stands at just 15%.
Chris Weston, head of research at Pepperstone, noted that while the market seemed to have settled on a 25 basis point cut for September, it remains open to the possibility of a 50 basis point cut in November, depending on the upcoming U.S. payrolls report on October 4.
Despite some pressure from inflation data, Wall Street saw a boost from technology stocks, with Nvidia soaring 8% following news that the U.S. government might permit the export of advanced chips to Saudi Arabia. Regional tech-heavy markets followed suit, with Taiwan rising 2.8% and South Korea gaining 1.7%.
China’s markets were relatively subdued, while Hong Kong’s Hang Seng index increased by 1.2%. In the foreign exchange market, the dollar remained near a four-week high against the euro, which eased to $1.1015.
Short-dated U.S. Treasuries experienced a sell-off overnight, with two-year yields rising 1 basis point to 3.66%, and 10-year yields at 3.6665%. This resulted in a slight flattening of the 2-10 year yield curve.
Oil prices extended their gains amid concerns that Hurricane Francine could lead to prolonged production shutdowns in the U.S. Brent crude futures rose 0.7% to $71.09 a barrel, finding support at $68.69, the lowest level in nearly three years. Gold prices edged up 0.2% to $2,517.89 an ounce, just shy of its record high of $2,531.60.
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