By Tom Westbrook
SINGAPORE (Multibagger) - Asian share markets scaled new highs on Friday as investors anticipated potential U.S. rate cuts in September, fostering an upbeat mood. Meanwhile, the euro surged to a three-week peak ahead of the upcoming French elections.
Sterling held firm at $1.2767, buoyed by projections of a landslide victory for Britain's Labour Party, ending 14 years of Conservative rule. The dollar slightly weakened, and Treasury yields edged higher in Tokyo as trading resumed post-U.S. Independence Day holiday.
Major indices nudged up to record levels, notably Taiwan's benchmark. MSCI's broadest index of Asia-Pacific shares outside Japan rose 0.2% to a two-year high, propelled by Samsung's (KS:) projection of a more than 15-fold increase in second-quarter profit, which also pushed South Korea's index to a two-year peak.
Singapore's bank and property-heavy Straits Times index climbed over 3% in three days, marking two-year highs.
"Global liquidity remains ample, and with the S&P 500 frequently hitting record highs, valuations elsewhere will inevitably present a compelling case," commented Vishnu Varathan, Chief Economist at Mizuho in Singapore.
Varathan noted that surging demand for artificial intelligence had fueled rallies in Taiwanese and South Korean chipmakers, interest rate settings had driven record profits for Singapore's major banks, and a weak yen had boosted Japanese equities.
Japanese household spending unexpectedly fell in May, as per government data released on Friday, complicating the interest rate outlook. The weak yen has reduced consumers' purchasing power, contributing to the decline.
The yen slightly appreciated to 160.9 per dollar. The Japanese market opened 0.3% higher on Friday, with indicators suggesting a potential fresh record for the cash index later in the day.
JOBS IN FOCUS
U.S. employment data headlines the economic calendar on Friday. A forecasted slowdown in hiring and a slight uptick in unemployment could pave the way for potential U.S. rate cuts.
A series of subdued data, including the U.S. ISM measure of services activity hitting its lowest level since mid-2020 earlier in the week, raised the probability of a rate cut in September to 73% and priced in 47 basis points of cuts this year.
Two-year U.S. Treasury yields rose 1.3 basis points to 4.71% in the Asian morning, while benchmark 10-year yields increased by 2 basis points to 4.37%.
In currency markets, the euro climbed to $1.0817, influenced by polls indicating France's far-right National Party falling short of an absolute majority in Sunday's parliamentary election runoff.
"If the polls are accurate, it means the more extreme policies of fiscal expansion and immigration curbs are unlikely to pass," stated MUFG analyst Michael Wan.
The Australian dollar reached a six-month high of $0.6738, driven by favorable yield spreads and expectations of rate hikes due to persistent inflation. [AUD/]
In commodity trading, a weaker dollar propelled gold towards its largest weekly gain in a month, up 1.4% to $2,357 an ounce. Oil prices reached their highest levels since April, with futures holding above $87 a barrel following a larger-than-expected drop in U.S. stockpiles, indicating strong demand as the U.S. summer driving season kicks off.
Bitcoin dropped 2%, trading close to a four-month low at $56,955.
Analysis and Breakdown: Understanding the Current Market Trends and Their Impact on Your Finances
Let's break down the key points from the article to ensure everyone can understand how these developments might affect their financial situation:
1. **Asian Markets Surge**: Asian stock markets have reached new highs. This is largely due to expectations of potential interest rate cuts in the U.S. Such rate cuts can make borrowing cheaper and stimulate economic growth, which is attractive to investors.
2. **Currency Movements**: The euro has strengthened against the dollar, and the British pound is also doing well. This can affect international trade and travel costs. A strong euro means European goods become more expensive for other countries, potentially impacting European exporters.
3. **Interest Rates and Treasury Yields**: U.S. Treasury yields have seen slight increases. Treasury yields are a good indicator of investor sentiment about future economic conditions. Higher yields generally mean investors expect higher growth or inflation.
4. **Employment Data**: U.S. job data is crucial. A slowdown in hiring and a slight increase in unemployment could lead to interest rate cuts by the Federal Reserve to stimulate the economy. This affects everything from mortgage rates to savings accounts.
5. **Commodity Prices**: Gold and oil prices are up. Gold is often seen as a safe-haven asset, so its rise could indicate that investors are looking for security amid economic uncertainty. Higher oil prices can impact transportation and production costs, which might lead to higher prices for goods.
6. **Cryptocurrency**: Bitcoin has dropped in value. Cryptocurrencies can be highly volatile and are influenced by a wide range of factors, including regulatory news and market sentiment.
In essence, these market movements and data points suggest a mix of optimism and caution in the global economy. For individual investors, it’s a reminder to stay informed and consider how global financial trends might impact personal investments and financial planning.