Asian markets on Friday tracked a record-breaking day in New York and Europe as traders grew increasingly optimistic for a series of US interest rate cuts this year, with attention now on crucial jobs data due later in the day.
Expectations for a first reduction in June have ramped up after Federal Reserve boss Jerome Powell this week told lawmakers that while the battle against inflation was ongoing, the economy remained resilient and he saw a more dovish tilt coming soon.
He said the Fed “can and will” begin lowering rates if the economy remains strong, inflation keeps falling and the jobs market softens.
His remarks were echoed by Cleveland Fed chief Loretta Mester, who was also keen to make sure the bank continued to rein in prices.
The European Central Bank added to the upbeat mood in trading floors, with its president Christine Lagarde suggesting reductions could start in June.
Traders seized on the soft pivot on both sides of the Atlantic, with the S&P 500 and Nasdaq chalking up records on Wall Street, while Paris and Frankfurt also closed at all-time highs.
Asian investors picked up the baton happily Friday, with Hong Kong, Tokyo, Sydney, Seoul and Taipei leading the way. Singapore, Wellington, Manila and Jakarta were also up, though Shanghai struggled.
Focus is now on the US non-farm payrolls figures due later in the day, which analysts said will have a big bearing on markets.
“Much hinges on (the) US payrolls report for whether intra-week market moves can extend or suffer a smart reversal,” said National Australia Bank’s Ray Attrill.
“Bad (weak) news will be good news in this regard, with rising confidence in lower rates currently in the global markets driving seat.”
The yen extended its gains to hit a one-month high of 147.53 to the dollar as the shift to lower US rates comes as bets increase on the Bank of Japan finally moving away from its long-running ultra-loose monetary policy.
With the Japanese economy strengthening and inflation holding well above the BoJ’s two percent target, officials are said to be looking at hiking borrowing costs out of negative territory as soon as this month.
“The market has suddenly woken up to the idea that the BoJ will end negative rates in a matter of weeks,” said Neil Wilson at Finalto.
Gold was holding just below the $2,164.78 record touched Thursday. The commodity is seen as a go-to asset when the yield on other assets such as bonds begins to come down, as is happening now that the Fed is pricing in rate cuts.
Key figures around 0230 GMT
Tokyo – Nikkei 225: UP 0.9 percent at 39,935.24 (break)
Hong Kong – Hang Seng Index: UP 1.0 percent at 16,394.27
Shanghai – Composite: DOWN 0.1 percent at 3,025.45
Euro/dollar: DOWN at $1.0945 from $1.0951 on Thursday
Dollar/yen: DOWN at 148.00 yen from 148.07 yen
Pound/dollar: DOWN at $1.2806 from $1.2819
Euro/pound: UP at 85.48 pence from 85.46 pence
West Texas Intermediate: UP 0.6 percent at $79.38 per barrel
Brent North Sea Crude: UP 0.5 percent at $83.33 per barrel
New York – Dow: UP 0.3 percent at 38,791.35 (close)
London – FTSE 100: UP 0.2 percent at 7,692.46 (close)
