Asian stocks advanced on Thursday amid growing expectations that the U.S. Federal Reserve will cut interest rates in September. Meanwhile, the euro strengthened ahead of the European Central Bank's anticipated rate cut at its policy meeting.
The shift in Fed expectations pushed up oil prices and pushed down U.S. Treasury yields to their lowest levels in two months, following signs of softening in the labor market.
MSCI's broadest index of Asia-Pacific shares outside Japan rose by 1.14%, driven by gains in tech stocks, aiming to end the week with a 2.7% increase and break a two-week decline. Japan's Nikkei index climbed by 1%.
Chinese and Hong Kong stocks also saw gains, with China's blue-chip index up by 0.38% and Hong Kong's Hang Seng index adding 0.81%.
Indian stocks were set for a quiet opening amid political uncertainty, as Prime Minister Narendra Modi formed a new coalition government amidst concerns over its stability and impact on economic reforms.
On Wednesday, the S&P 500 and Nasdaq reached record highs, boosted by Nvidia's surge, making it the world's second most valuable company after surpassing Apple in market value.
Recent U.S. economic data, including weaker private payroll figures, have reinforced expectations of Fed rate cuts. Markets are now pricing in a 49 basis points reduction in rates this year, with a 69% probability of a cut in September, up from 47.5% a week ago according to CME FedWatch.
"We're still in a favorable economic environment where bad news supports equities due to expectations of Fed rate cuts," said Ben Bennett, Asia-Pacific investment strategist at Legal And General Investment Management.
Investor attention now turns to Friday's nonfarm payroll report, with economists expecting an increase of 185,000 jobs. Any significant deviation from this range could impact market sentiment and Treasury yields.
The yield on 10-year U.S. Treasury notes stood at 4.2929% in Asian trading, having touched a low of 4.2750% on Wednesday, the lowest since April 1.
In currency markets, the dollar weakened broadly, with the yen strengthening to 155.445 per dollar, close to its highest level in over two weeks. The euro edged up to $1.089025, near its highest level in two and a half months ahead of the ECB meeting.
The ECB is widely expected to cut interest rates on Thursday and provide updates on inflation and future policy. Investors are monitoring for signals on further rate cuts, with markets pricing in 64 basis points of cuts this year.
The Bank of Canada also cut its key policy rate on Wednesday, the first among G7 nations, indicating a cautious approach to further easing dependent on economic data.
In commodities, Brent crude futures rose 0.48% to $78.79 per barrel, while U.S. West Texas Intermediate crude futures gained 0.66% to $74.55 per barrel.
Paraphrasing text from "Reuters" all rights reserved by the original author.
