Optimism soars in Asian markets amid Fed rate cut expectations

May 07, 2024 (MLN): Asian markets built on the latest global rally Tuesday as optimism that the US Federal Reserve will cut interest rates this year continued to breeze through trading floors, as APP reported. 

Friday's big miss on jobs creation for April, a strong earnings season and soothing comments about the policy outlook by central bank chief Jerome Powell have combined to push equities higher in recent weeks.

Positive soundings out of Beijing on help for the world's number two economy and very low valuations after years of selling are also injecting some much-needed life into Hong Kong and mainland Chinese markets.

Investors will be keeping an eye on comments from Fed officials this week in light of the recent jobs data, which came after three months of forecast-beating inflation figures that had seen markets lower their rate cut expectations to less than two -- from six at the start of the year.

The upbeat mood was ushered in by Powell's remarks last Wednesday that he did not foresee borrowing costs going up again this year and that he still expected to cut at some point.

That tempered a lot of the volatility in markets caused by wild fluctuations in the yen at the start of last week that reportedly prompted two Japanese interventions.

"Bulls will be looking to maintain their momentum after snatching last week from the jaws of bears," said Chris Larkin at E Trade from Morgan Stanley.

"This week is light on high-profile economic data, but heavy on Fed members hitting the speaking circuit. Traders will be dissecting any comments they make about potential rate cuts."

Richmond Fed chief Thomas Barkin earlier this week said: "I am optimistic that today's restrictive level of rates can take the edge off demand to bring inflation back to our target.

"The full impact of higher rates is yet to come," he said in prepared notes, according to Bloomberg News.

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