Asian markets track Wall St records after Powell hints at rate cut

People ride vehicles past the Beijing Stock Exchange in Beijing on July 9, 2024. (Photo by ADEK BERRY / AFP)

Updated on July 11, 2024 at 3:36 p.m.

Asian stocks on Thursday tagged along with a Wall Street rally that saw another round of record highs as bets on a September interest rate hike surged following comments by Federal Reserve boss Jerome Powell.

The advances also saw Hong Kong and Shanghai push higher after struggling in recent weeks over worries about the Chinese economy, with investors awaiting a key Communist Party meeting next week.

On a second day of testimony to lawmakers, Powell said decision-makers would not wait until inflation had hit the bank’s two percent target before loosening monetary policy, adding: “If you waited that long, you’ve probably waited too long.”

READ: Fed’s Powell stresses message that US job market is cooling

His remarks came before the release of the latest consumer price index reading on Thursday, which is expected to show a further slowdown.

Traders ramped up bets on the Fed reducing borrowing costs in two months’ time, with analysts saying Powell was telegraphing to markets that the decision had been made.

The comments soothed recent fears among investors that officials might keep rates at their two-decade high for some time owing to a still strong labour market and inflation staying stubbornly above two percent.

The S&P 500 ended with a sixth straight record, while the Nasdaq also finished at an all-time peak.

And the upbeat mood filtered through to Asia, where Hong Kong jumped two percent, while Tokyo, Shanghai, Sydney, Seoul, Singapore, Wellington, Taipei, Manila, Bangkok and Wellington also rose.

London, Paris and Frankfurt all rose at the open.

READ: S&P 500 tops 5,600 as Wall Street’s record-breaking rally keeps rolling

Eyes are also turning to the start of China’s Third Plenum gathering on Monday, where top officials including President Xi Jinping are expected to discuss ways to kickstart the world’s number two economy in the face of an ongoing property crisis and geopolitical issues.

However, while there is hope for some sort of major policy announcement, commentators remain cautious.

Andrew Batson, of Beijing-based consultancy Gavekal Dragonomics, told AFP he did not expect a “fundamental departure from the course Xi has already laid out”, in which technological self-sufficiency and national security outweigh economic growth.

Nomura’s Ting Lu added that the meeting was “intended to generate and discuss big, long-term ideas and structural reforms instead of making short-term policy adjustments”.

Economic growth in the first quarter of the year came in above forecasts and is tipped to top the government’s five percent goal for April-June, but the meeting comes amid ongoing concerns that officials are not providing enough support.

Taylor Nugent at National Australia Bank warned: “Further monetary policy easing is constrained by a reluctance to allow further depreciation in the renminbi, and expectations are low for any big policy shift at the Third Plenum.”

Key figures around 0715 GMT

Tokyo – Nikkei 225: UP 0.9 percent at 42,224.02 (close)

Hong Kong – Hang Seng Index: UP 2.0 percent at 17,832.61

Shanghai – Composite: UP 1.1 percent at 2,970.39 (close)

London – FTSE 100: UP 0.3 percent at 8,214.13

Euro/dollar: UP at $1.0835 from $1.0833 on Wednesday

Pound/dollar: UP at $1.2859 from $1.2848

Dollar/yen: DOWN at 161.69 yen from 161.71 yen

Euro/pound: DOWN at 84.25 pence from 84.29 pence

West Texas Intermediate: UP 0.7 percent at $82.66 per barrel

Brent North Sea Crude: UP 0.7 percent at $85.67 per barrel

New York – Dow: UP 1.1 percent at 39,721.36 (close)