Asian Stocks Firm as Dollar Weakens on Fed Rate Cut Expectations
Asian stocks were firm on Thursday as the dollar remained on the back foot due to lower U.S. Treasury yields following benign consumer inflation data. This reinforced expectations for the Federal Reserve to start cutting interest rates next month.
Regional equities took their cue from gains on Wall Street, with Japan's Nikkei rising 0.5% and Australia's stock benchmark up 0.1%. Mainland Chinese blue chips added 0.4%, while Hong Kong's slipped 0.3%.
U.S. futures pointed 0.1% higher after the cash index advanced 0.4% on Wednesday, buoyed by the slowest rise in the consumer price index in over three years.
The dollar remained weak after falling to its lowest level against the euro since the end of last year. The single currency traded flat at $1.1009 after reaching $1.10475 in the previous session.
The 10-year Treasury yield ticked up slightly to 3.84% in Asian hours, after dipping to as low as 3.811% on Wednesday.
Traders are confident that the Fed will reduce rates on Sept. 18 for the first time in 4-1/2 years, but are divided on whether policy makers will opt for a 50 basis-point reduction. Signs of sticky inflation have reduced bets on a larger cut to 37.5% from about 50% a day earlier.
A key economic indicator, U.S. retail sales figures, is set to be released later on Thursday. A negative retail sales number could raise concerns about a recession in the U.S.
The dollar was stable against the yen at 147.35, while sterling remained depressed after soft UK inflation figures. The Australian dollar erased early losses to be slightly higher following an increase in employment.
Gold edged up 0.1% to $2,449.60 per ounce, while oil prices rose on hopes that potential Fed rate cuts would boost demand.
Oil futures added 0.2% to $79.93 a barrel, and U.S. West Texas Intermediate crude increased 0.3% to $77.21. Both benchmarks fell more than 1% on Wednesday after an unexpected rise in inventories.
In conclusion, the financial markets are reacting positively to the expectation of a Fed rate cut next month, with stocks rising and the dollar weakening. Traders are closely watching economic indicators such as inflation and retail sales figures for further insight into the state of the economy. This could have an impact on individual's investments and financial decisions, so staying informed and understanding these market movements is crucial for financial planning.