Asian markets gain on Fed rate cut hopes

May 31, 2024 (MLN): Asian markets rose Friday after falling for much of the week, with below-forecast US data injecting some fresh life into hopes the Federal Reserve will cut interest rates this year, as APP reported.

The readings came ahead of the release of the central bank's favored gauge of inflation later in the day, which could provide more of an idea about the outlook for monetary policy.

Bets on how many reductions, if any, will be announced this year have been whittled down since January owing to a string of outsized data and warnings from decision-makers that they want to see strong evidence prices are under control before moving.

Most have called for rates to be kept elevated for some time, while some have even advocated for another hike.

Meanwhile, the yen edged up against the dollar on expectations the Bank of Japan will tighten monetary policy further — having hiked rates in March for the first time in 17 years — following a jump in closely watched Tokyo inflation.

Investors in Asia, who have struggled to revive a recent rally, were given a much-needed lift by US data Thursday showing the economy grew less than expected in the first quarter, personal consumption missed forecasts and jobless claims topped estimates.

The figures helped push Treasury yields down after they hit a four-week high.

But all focus is now on the personal consumption expenditures (PCE) index, which the Fed puts the most faith in when considering its plans for rates.

The report comes after data showed consumer prices eased last month — ending a run of three successive above-forecast prints — and the jobs market softened.

"Assuming the PCE comes in OK, the data suggests the Fed doesn't need to hike and may cut later in the year," Capital.com's Kyle Rodda said.

Friday also sees the release of the latest eurozone consumer price index, a key data point ahead of the European Central Bank's monetary policy meeting on June 6, when it is tipped to reduce rates.

A weak showing among most tech giants weighed on Wall Street, though Asian investors went their own way after a week of selling.

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