SYDNEY – Asian shares took a breather on Monday after global stock markets hit a nine-month high on hopes the U.S. economy will avoid recession and tame inflation will kickstart a cycle of interest rate cuts.
Gold topped $2,500 an ounce for the first time and the dollar fell against the euro on the prospect of lower borrowing costs, while safe-haven currencies the yen and Swiss franc both weakened as risk appetite returned.
Federal Reserve Governors Mary Daly and Austen Goolsbee signalled over the weekend that monetary policy could be easing in September, but minutes from the central bank's last policy meeting due this week are likely to highlight a more dovish outlook.
Fed Chairman Jerome Powell speaks in Jackson Hole on Friday, and investors expect him to acknowledge the need to cut interest rates.
“It may be too early to declare victory and central banks will be careful to avoid this in their official comments, but the inflation concerns that have dominated policy discussions since prices began to surge during the pandemic have now all but disappeared,” said Christian Keller, economist at Barclays.
“Inflation may not yet be at our 2% target, but it is getting close and moving in the right direction.”
Futures are fully pricing in a quarter point move, implying a 25% chance of a 50 basis point move, but much will depend on what the next employment report shows.
Goldman Sachs analysts warned that the annual benchmark employment report, due to be released on Wednesday, could result in a big downward revision of payrolls by between 600,000 and 1 million, which would likely exaggerate the weakness in the labor market.
For now, S&P 500 futures are up 0.2% and Nasdaq futures are up 0.3%, building on last week's gains, on hopes of a softer than expected landing for the U.S. economy.(.N)
MSCI's broadest index of Asia-Pacific shares ex-Japan was up 0.2%, having risen 2.8% last week.
Japan's Nikkei stock average fell 0.4%, following a nearly 9% rise last week.
The Fed is not the only one considering easing policy: Sweden's central bank is expected to cut interest rates significantly this week, perhaps by 50 basis points.
In currency markets, the euro was stable at $1.1025, slightly below last week's high of $1.1047. The dollar was at $147.79, having risen to $149.40 last week. (USD/)
“The Fed's overall messaging this week will likely reassure market participants looking for confirmation that a rate cut is imminent,” said Jonas Goltermann, deputy chief market economist at Capital Economics.
“So while the dollar may remain under pressure in the near term, it's hard to see it falling much further given that Fed easing is already priced in.”
Gold prices were trading at $2,506 an ounce, hovering near an all-time high of $2,509.69, due to a weak dollar and falling bond yields. (GOL/)
Oil prices fell again as concerns about Chinese demand continued to weigh on sentiment. (O/R)
Brent crude fell 29 cents to $79.39 a barrel, while U.S. crude fell 27 cents to $76.38 a barrel.
This article has been generated from an automated news agency feed without any modifications to the text.
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