Most Asian markets were higher on Monday, building on last week’s rally after the US Federal Reserve cut interest rates, with the focus now on the release of the bank’s favored inflation gauge later in the week.
Traders welcomed the first cut in borrowing costs since 2020, pushing the Dow and S&P 500 to record highs as they mulled a soft landing for the world’s top economy.
While the Fed is expected to continue easing monetary policy, US investors took a breather on Friday — although the Dow fell to another all-time high — with observers saying a retreat was expected after the latest development.
But Asian traders shrugged off a lackluster performance in New York on Friday, even after another round of data showed the Chinese economy remained weak.
The Bank of Japan leaves the key interest rate unchanged
China’s youth unemployment hit 18.8 percent in August, the highest level this year, as leaders struggle to jump-start growth and face calls for more stimulus — particularly for the struggling property sector.
The report came after news earlier in the month of a slowdown in retail sales and an increase in industrial production for August.
“As the housing market struggles and the unemployment rate rises, households are cautious with their spending,” Moody’s Analytics said.
“Government measures to stimulate domestic demand have not yet encouraged households to spend.”
In early trade, Hong Kong, Shanghai, Seoul, Singapore, Taipei and Manila rose, although Sydney, Jakarta and Wellington fell.
Tokyo was closed for a holiday.
All eyes are now on the release this week of the personal consumption expenditure index, the Fed’s preferred measure of inflation, which could guide policymakers’ decision-making on the next interest rate move.
Asian markets hit Wall Street records to extend global rally
Fed chief Jerome Powell signaled a tentative victory in the fight against inflation, noting that the risks of further escalation in inflation have ‘reduced,'” wrote IG analyst Tony Sycamore.
“The focus of monetary policy has now clearly shifted towards supporting the labor market to ensure a soft economic landing, as evidenced by the significant 50 basis point cut.”
Oil prices rose on concerns of an escalation of conflict in the Middle East after Lebanon-based Hezbollah fired dozens of rockets at Israel, with both sides threatening to escalate hostilities.
The yen struggled to recover against the dollar after plunging on Friday in reaction to the Bank of Japan’s decision not to raise interest rates for the third time this year and suggested it was in no rush to tighten policy further.
And gold hit record highs above $2,600 after the Fed cut interest rates, making the precious metal more attractive to traders and geopolitical concerns.
Japan inflation firms at 2.8% ahead of BoJ rate decision
Keys around 02:30 GMT
Hong Kong – Hang Seng Index: UP 0.4 percent at 18,325.53
Shanghai – Composite: UP 0.2 percent to 2,743.11 points
Tokyo – Nikkei 225: Closed due to holiday
Pound/Dollar: DOWN to $1.3312 from $1.3316 on Friday
EUR/USD: DOWN to $1.1157 from $1.1160
Dollar/yen: UP to 144.37 yen from 144.02 yen
Euro/pound: UP to 83.82 pence from 83.80 pence
West Texas Intermediate: UP 0.4 to $71.28 a barrel
North Sea Brent crude: UP 0.4 percent at $74.78 a barrel
New York – Dow: UP 0.1 percent at 42,063.36 (close)
London – FTSE 100: Down 1.2 percent at 8,229.99 (close)
Source: AFP