Asian equities soared on Thursday as U.S. rate cuts remained on the table, even if their timing was uncertain, while the yen fell against all currencies save the dollar, boosting Japanese stocks.
Commodities also saw activity, with gold setting a new record, oil reaching a five-month high, and copper reaching a 13-month high, all of which helped boost shares in basic materials and energy businesses.
Some of these gains were attributable to supply disruptions and geopolitical tensions, but they also reflect optimism about global economy after recent factory surveys (PMI) showed a resurgence, particularly in China.
"Steady improvement in manufacturing surveys throughout the last quarter point to momentum improving broadly in the coming months," wrote JPMorgan analysts in a note.
"The global manufacturing output PMI moved further into expansionary territory in March, reflecting largely positive results across the major economies," according to the researchers. "Global business confidence is on the mend."
MSCI's broadest index of Asia-Pacific shares outside Japan rose 0.4%, despite the fact that China's vacation caused trading conditions to be light.
Tokyo's Nikkei index rose 1.5% as the yen plummeted, with the materials, industrials, and energy sectors leading the charge.
The EUROSTOXX 50 and FTSE futures were little changed in early trading. S&P 500 futures jumped 0.2%, while Nasdaq futures increased 0.3%.
Sentiment was boosted by Federal Reserve Chair Jerome Powell's reaffirmation that US interest rates would be cut this year, though the timing would be determined by data.
The case for easing was supported by a survey of the US services sector, which showed that its index of prices paid fell to its lowest level since March 2020, countering a troubling jump in the manufacturing survey issued earlier this week.
This also outweighed a surprise robust ADP data, which showed an increase of 184,000 private-sector employment.
While this series has a patchwork link with the official payrolls report due on Friday, it was good enough for Goldman Sachs to increase its payroll projection by 25,000 to a robust 240,000.
Such an outcome would exceed the median prediction of 200,000 and could cause markets to reduce the likelihood of a June rate cut.
PRICING WITH FEWER CUT
Fed fund futures have already reduced the probability of a June move to 62% from 74% a month ago.
The more significant shift has been in how quickly and far rates are predicted to decline, with approximately 73 basis points priced in for this year, compared to more than 140 basis points in January.
Investors have also taken 100 basis points of easing out of 2025, so rates are expected to conclude next year around 4% rather than 3%.
That seismic change has left Treasuries under water, with 10-year rates reaching a four-month high of 4.429% on Wednesday before falling slightly to 4.356%.
The rise in rates has typically boosted the dollar, though it did lose some gain following Wednesday's US services survey.
That left the euro at $1.0840, up 0.6% overnight, while the dollar index was at 104.21, down 0.5% the previous day.
While the fear of Japanese intervention kept the dollar around 151.60 yen, just shy of the 152.00 mark, other currencies were not as restrained, and the yen fell substantially abroad.
The euro was up 0.7% on Wednesday to 164.34 yen, having recovered four days of losses, while the Canadian dollar hit a 16-year high of 112.31 yen.
Gold continued its brilliant run, setting a new high at $2,302 per ounce. The metal has risen 12% since the beginning of February, thanks in part to purchases by momentum funds and commodity trading advisors (CTAs).
Oil prices have also risen as a result of Ukraine's attacks on Russian refineries, as well as concerns that the Israel-Hamas conflict in Gaza could expand to Iran, potentially impacting Middle Eastern supplies.
On Wednesday, top ministers from the Organization of Petroleum Exporting Countries (OPEC) and its allies, including Russia, maintained the same oil supply policy while pressing some countries to increase compliance with output restrictions.
Brent jumped another 30 cents to $89.65 per barrel on Thursday, while US crude rose 30 cents to $85.73.
Paraphrasing text from "Investing" all rights reserved by the original author.
