Latest News

Asia stocks rise, bonds fall when traders assess the odds of a bigger Fed cut

Asian stocks followed Wall Street higher Wednesday, while bonds fell. Traders increased their bets on the possibility that the Federal Reserve would cut rates next week by at least one quarter point due to a softening of U.S. labor market conditions.

The dollar is also rising, as the U.S. Inflation figures will be released on two days, beginning later Wednesday. These are the last data that will inform the Fed’s decision of September 17.

Crude oil prices remained high after Israel's attacks on Hamas leaders in Qatar.

The Nikkei 225 index in Japan rose 0.3%. South Korea's KOSPI increased by 1.3%. Taiwan's equity benchmark also increased by 1%.

Hong Kong's Hang Seng rose by 0.5% while mainland Chinese blue-chips rose by 0.2%.

Overnight, S&P 500 and Nasdaq Composite, as well as Dow Jones Industrial Average, each finished the day with new all-time records. S&P futures were 0.2% higher Wednesday.

The CME Group's FedWatch Tool shows that traders see a Fed rate cut next Wednesday as an almost certain thing. They even place 7% odds on such a large half-point drop, according to the tool.

Investors were convinced that the Fed could not wait to support the economy any longer after a dismal payroll number was released last week.

The final obstacles to this view will be the readings of consumer and producer inflation on Wednesday and/or Thursday.

Kyle Rodda is a senior financial market analyst at Capital.com. He said that an upside inflation surprise would cause the probability of a rate cut to be reduced, not just for September but also for future months.

According to current risk appetite, the rapid deterioration of U.S. data on the economy, especially jobs, is the reason that markets are pricing such aggressive easing by the Fed.

Treasury bonds, a safe-haven investment that has been around for centuries, fell for a second consecutive day on Wednesday. This pushed yields up.

After a nearly 3-basis-point increase on Tuesday, the 10-year Treasury yield increased by almost 2 basis points.

The equivalent yield on Japanese government bonds rose by 1.5 basis points, to 1.575%.

In the last session, the U.S. Dollar held onto gains made on Tuesday. The dollar index (which measures the currency versus six rivals) was flat at 97.78 after beginning Wednesday with a slight increase.

The dollar was unchanged at $1.1705 to the euro, and 0.06% lower at 147.33yen.

This Thursday, the European Central Bank will set its policy and it is expected that rates will remain unchanged.

One month ago, economists were divided on whether the ECB would continue to reduce rates. However, recent data shows that inflation is holding near the 2% target, and unemployment has reached a new low.

On Friday of next week, the Bank of Japan will announce its latest policy decisions. It is widely expected that they will not raise rates this time.

Bloomberg and the BOJ issued contradictory reports Tuesday regarding tone. Bloomberg reported that policymakers were looking at a hike in this year, while Bloomberg said they may delay tightening policy.

Investors are also watching politics. They're focusing on Shigeru-Ishiba's successor as Japan's new prime minister and the ability of France's fifth newly appointed prime minister in just two years to stay on.

The price of gold edged up by 0.2%, to $3,633 an ounce. This comes after the previous day's record jump to $3,673.95.

Brent crude futures increased 0.5%, reaching $66.74 per barrel. U.S. West Texas Intermediate Crude futures increased 0.6% to $62.99 per barrel.

Prices settled at 0.6% higher in the previous session, after Israel claimed it had attacked Hamas leaders in Doha. Qatar's Prime Minister said that this attack threatened to derail talks between Hamas & Israel.

(source: Reuters)