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Global equity/currency market update: Asian Shares Reach Three-Week High Amid Tech Rally and Rate Cut Expectation

19 Jun 2024 9:01 am
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Mumbai, 19 Jun (Commoditiescontrol): Asian shares climbed to their highest in three weeks on Wednesday, driven by a surge in tech stocks, while the dollar faltered following soft U.S. retail sales data that reinforced expectations of a Federal Reserve rate cut later this year.

MSCI's broadest index of Asia-Pacific shares outside Japan gained 0.72%, with regional tech stocks up 1.6% at a record high. Japan's Nikkei rose 0.59%, while blue-chip stocks in China dipped 0.42%. Hong Kong's Hang Seng index surged 1.3%.

Tuesday's data revealed U.S. retail sales barely increased in May, with April’s data significantly revised down, indicating sluggish economic activity in the second quarter. This prompted a slight increase in rate cut expectations for September, with traders now pricing in a 67% chance of easing, up from 61% the previous day, according to the CME FedWatch tool. Markets are anticipating 48 basis points of cuts this year.

Despite mild U.S. inflation readings last week, Fed officials have maintained a generally hawkish stance, trimming their previous projection of three quarter-point rate cuts this year to just one. Fed officials are now cautiously looking for more signs that inflation is cooling while monitoring the strong labor market as they move toward possible rate cuts by year-end.

The S&P 500 and Nasdaq reached record highs on Tuesday, with Nvidia surpassing Microsoft to become the world’s most valuable company. U.S. markets are closed on Wednesday, likely leading to subdued trading.

In currency markets, the dollar index, which measures the U.S. currency against six rivals, was last at 105.29. The euro steadied at $1.0738, pressured by political uncertainties in Europe, including French President Emmanuel Macron's call for a snap election after his centrist party’s losses in the European Parliament elections. Sterling remained flat at $1.2704 ahead of UK inflation data, expected to influence the Bank of England's policy decision on Thursday. The inflation report is projected to show a drop in the UK's inflation rate to the BoE's 2% target in May, down from 2.3% in April.

In Asia, the Japanese yen hovered near a six-week low at 157.83 per dollar, pressured by the interest rate gap between Japan and the U.S. Bank of Japan's April meeting minutes indicated a debate on the impact of a weak yen on prices, with some policymakers suggesting potential rate hikes if inflation exceeds expectations.

In commodities, oil prices fluctuated as concerns over escalating conflicts in Europe and the Middle East balanced out worries about demand following an unexpected rise in U.S. crude inventories.

(By Commoditiescontrol Bureau: 09820130172)


       
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