Source: AFP
Asian investors were cautious on Tuesday after the latest rebound in optimism fueled by hopes that Federal Reserve chief Jerome Powell will signal a rate cut in a much-anticipated speech to top central bankers this week.
With recent data showing the US economy remains in good shape as inflation slows and the labor market softens, there is widespread expectation that the central bank will finally begin to ease its long-running program of tight monetary policy next month.
A string of earnings from US stores Target, Lowe’s and TJX are also available this week, providing more insight into consumer confidence after last week’s reassuring retail sales performance.
But the main focus is Powell’s remarks at the annual conference of world central bank leaders and financiers in Jackson Hole, Wyoming, which is seen as a possible starting point for the Fed’s rate-cutting cycle.
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Bets have grown that officials will cut interest rates by 25 basis points next month — with some as low as 50 basis points — followed by two more before the end of the year.
Powell expressed hope for a move at the bank’s most recent meeting, when he said it could happen “as soon as possible” in September, having previously said the policy board did not need to wait for inflation to fall to its 2% target before cutting interest rates.
“All eyes and ears are tuned in, anxiously waiting to see if it will confirm the current market pricing,” said independent analyst Stephen Innes.
“The market is positioning his remarks as more consequential than usual, hoping for a risk signal that sets the stage for the capping of the (political table) in September,” he said in his Dark Side Of The Boom newsletter.
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But he added: “But don’t expect Powell to spill the whole enchilada of rate cuts just yet. With yet another non-farm payrolls report to navigate, the decision between a 25 or 50 basis point cut in September is still in development. the air, ready to be the opening script of a story of many rhythms.”
Two top Fed players provided support for a cut.
San Francisco Fed chief Mary Daly told the Financial Times she has “more confidence” that inflation is taming after the latest data.
Her colleague at the Minneapolis Fed, Neel Kashkari, told the Wall Street Journal that the prospect of a weaker labor market makes talk of tapering appropriate.
All three major indexes on Wall Street ended well, with the S&P gaining one percent and the Nasdaq up 1.4 percent.
Asian investors are a bit more cautious.
Tokyo rallied 1.7%, recovering almost all of Monday’s losses, while Sydney, Seoul, Singapore, Taipei, Manila and Jakarta were also higher.
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However, Hong Kong and Shanghai have struggled to capitalize on their recent gains, while Wellington has also fallen.
Crude prices extended Monday’s plunge on rising hopes of a ceasefire in Gaza as US Secretary of State Anthony Blinken continued talks with regional leaders.
After meeting Israeli Prime Minister Benjamin Netanyahu, Blinken said Israel had accepted a US “bridging offer” and pressed Hamas to do the same, having earlier said the talks could be the “last chance” for a agreement.
US President Joe Biden said last week that a deal could see Iran refrain from attacking Israel in retaliation for the killing of a Hamas leader in Tehran.
Keys around 02:30 GMT
Tokyo – Nikkei 225: UP 1.7 percent at 38,015.87 (break)
Hong Kong – Hang Seng Index: DOWN 0.4 percent to 17,507.97
Shanghai Composite: DOWN 0.8 percent at 2,871.57
EUR/USD: DOWN at $1.1084 from $1.1086 on Monday
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GBP/USD: DOWN to $1.2987 from $1.2989
Dollar/yen: DOWN at 146.41 yen from 146.61 yen
Euro/pound: UP to 85.35 pence from 85.33 pence
West Texas Intermediate: DOWN 0.5% to $74.00 a barrel
North Sea Brent crude: DOWN 0.4% to $77.37 a barrel
New York – Dow: UP 0.6 percent at 40,896.53 (close)
London – FTSE 100: UP 0.6 per cent at 8,356.94 (close)
Source: AFP
