Asian markets rose on Tuesday after gains in US stocks and ahead of Fed chief Jerome Powell’s testimony to Congress, which will be closely watched for any hints about the timing of rate cuts.
The U.S. central bank kept interest rates at their highest levels in two decades to bring inflation down to its long-term goal of two percent without causing much damage to either the labor market or the broader economy.
After years of focusing primarily on inflation, Fed officials have now increasingly turned their attention to the labor market, which has shown some signs of weakness in recent months despite remaining strong overall.
Traders will be watching Powell’s remarks to Congress on Tuesday and Wednesday with interest for any indication of when the Fed will begin cutting interest rates.
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The Fed chair last week raised hopes of a cut, saying the battle against inflation had made “progress” and the labor market was cooling.
“We expect Powell to reiterate the need to see more evidence of a slowdown in inflation before cutting rates. But with recent signs of softer growth and the labor market, markets will be watching closely to see if Powell gives any indication of the timing of tapering.” of interest rates,” he said. Carol Kong at the Commonwealth Bank of Australia.
“The Fed Funds futures market currently has an almost 80 percent chance of the first rate cut in September,” he said.
Investors are also looking to US consumer inflation data due on Thursday for further signs that price increases are still easing as expected, which would give the Fed more confidence to start cutting interest rates.
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“Powell is expected to hint at possible rate cuts from September if inflation continues to ease. A softer CPI print would likely support that outlook, keeping the US dollar on a weaker path,” said Luca Santos, market analyst at ACY Securities.
Wall Street’s main indexes were mostly up on Monday, with the S&P 500 and Nasdaq hitting new records.
The upbeat mood continued in Asia, with Tokyo up more than one percent, while Sydney, Seoul, Singapore, Taipei, Bangkok, Kuala Lumpur and Jakarta were all higher.
Hong Kong and Shanghai were lower ahead of a key policy meeting in China next week.
U.S. Treasury yields, closely watched as a benchmark for interest rates, were little changed.
In foreign exchange markets, the euro was flat against the dollar on Tuesday after the inconclusive outcome of France’s early election, with the single currency trading at $1.0827.
“Following the recent French election, political uncertainty remains high, yet the euro has shown remarkable stability during the Asian session,” Santos said, with its narrow trading range “reflecting the muted market response.”
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Keys around 0245 GMT
Tokyo – Nikkei 225: UP 1.4 percent at 41,342.44
Hong Kong – Hang Seng Index: DOWN 0.4 percent at 17,450.33
Shanghai – Composite: DOWN 0.4 percent to 2,911,053
EUR/USD: FLAT at $1.0827 from $1.0827 at 2030 GMT on Monday
Euro/pound: UP to 84.55 pence from 84.50 pence
Dollar/yen: UP to 160.99 yen from 160.80 yen
GBP/USD: DOWN to $1.2806 from $1.2810
West Texas Intermediate: DOWN 0.3% to $82.09 a barrel
North Sea Brent crude: DOWN 0.2 percent at $85.54 a barrel
New York – Dow: DOWN 0.1 percent at 39,344.79 (close)
London – FTSE 100: Down 0.1% to 8,193.49 (close)
Source: AFP