Asian Stocks Rise on Rate Cut Bets and AI Enthusiasm
Asian stock markets exhibited positive momentum amid rising expectations of Federal Reserve rate cuts. The potential decrease in interest rates has alleviated some concerns related to the ongoing U.S. government shutdown, which has put pressures on other financial sectors.
Market Reactions
Despite the U.S. government shutdown, investors appear unfazed. This is the 15th shutdown since 1981, and historically, such events have minimal impact on economic growth. Consequently, market reactions have been subdued.
Asian Stocks Performance
MSCI’s index for Asia-Pacific shares recorded a 0.3% increase, marking the second consecutive session of record highs. Currently, the index is on track for a 2.3% weekly gain, having surged approximately 23% since the beginning of the year.
- Nikkei (Japan): Increased by 1.5%, nearing recent record highs.
- Taiwan’s Benchmark Index: Also reached a record high, up over 1%.
U.S. Economic Context
The shutdown led to the suspension of key economic reports, including the jobs data set for release. Without this information, investors are relying on alternative indicators, revealing a sluggish labor market.
Federal Reserve Outlook
Economists anticipate that the Federal Reserve will enact a 25 basis point rate cut in October. By the end of 2026, traders are forecasting a total easing of 114 basis points. This has contributed to pressure on the U.S. dollar, which is on track for a weekly decline of 0.35%, its most significant drop since August.
Currency Movements
The Japanese yen has benefited from the weakened dollar, registering a 1.2% gain this week. It was trading at 147.74 per U.S. dollar, following ambiguous comments from the Bank of Japan regarding future interest rate hikes.
Commodity Trends
Gold prices have cooled slightly, trading at approximately $3,845.15 an ounce, but remain close to record highs. The metal is expected to achieve a weekly gain of over 2%, continuing a streak of seven consecutive weeks of increases. Year-to-date, gold has risen an impressive 47%.
- Gold: Emerging as a vital safe-haven asset.
- Oil Prices: Brent crude at $64.51; U.S. West Texas Intermediate at $60.85, both recovering slightly but facing a steep weekly decline.
As the financial landscape shifts, analysts suggest a long-term bearish outlook on the U.S. dollar, with gold being positioned as a key diversifier in investor portfolios.
