Asia markets hit new peaks on AI optimism

September 12, 2025 (MLN): Asia markets surged on Friday, mirroring Wall Street’s advance as expectations of further U.S. interest rate cuts buoyed investor sentiment and eased global borrowing costs.

Indexes in Japan, South Korea, and Taiwan hit record highs, driven by optimism over AI-related earnings growth.

Softer consumer price index (CPI) components, which feed into the Federal Reserve’s preferred inflation gauge core personal consumption expenditures (PCE) supported forecasts of easing price pressures.

Analysts at Citi projected a steady 2.9% reading for August.

“It’s an encouraging reading for Fed officials preparing to engage in a series of rate cuts,” said Citi economist Veronica Clark.

“We continue to expect 125 basis points of cuts over the next five FOMC meetings, with growing risk that the Fed will continue cutting rates below 3%.”

Markets are currently pricing in a 100% probability of a quarter-point cut to 4.00%-4.25% next week, with a nearly 90% chance of two additional cuts this year.

Anticipation of policy easing has already filtered through the Treasury market, with 10-year yields down 20 basis points in the past two weeks, easing U.S. mortgage rates and calming other global bond markets, particularly in Europe, where political uncertainty and rising fiscal pressures remain a concern.

In Asia, Japan’s Nikkei gained 0.6% to a new all-time high, lifting weekly gains to 3.7%.

South Korea’s Kospi rose 1.1%, advancing more than 5% over the week.

Chinese blue chips added 0.2% to their highest level since early 2022, while MSCI’s broadest index of Asia-Pacific shares outside Japan climbed 1.2%.

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