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Global equity/currency market update: Asia stocks rally on renewed global rate cut optimism

10 May 2024 8:50 am
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Mumbai, 10 May (Commoditiescontrol): Asian stocks climbed for a third consecutive week on Friday, buoyed by signs of a softening U.S. labor market which spurred hopes for interest rate cuts. Meanwhile, the dollar weakened in anticipation of next week's critical U.S. inflation data releases.

The British pound held steady at $1.2515, recovering from a more than two-week low of $1.2446 on Thursday after the Bank of England hinted at potential rate cuts starting as early as next month.

In Asia, MSCI's broadest index of Asia-Pacific shares outside Japan increased by 0.66%, aiming for a near 1% weekly gain. Japan's Nikkei surged 1.6%, while China's blue-chip stocks edged up 0.14%. Hong Kong's Hang Seng Index rose 1.4%, reaching an eight-month high earlier in the session.

In the U.S., data released on Thursday indicated an unexpected rise in initial unemployment claims to 231,000 for the week ending May 4, according to the Labor Department. This follows a report from last week showing a slowdown in U.S. job growth for April and a wage increase of less than 4.0% year-over-year, marking the first such occurrence in nearly three years.

Financial markets are now focused on the upcoming U.S. Producer Price Index (PPI) and Consumer Price Index (CPI) reports, which could indicate whether inflation is trending back towards the Federal Reserve's 2% target. Despite initial expectations, strong inflation figures last month dampened hopes for imminent rate cuts, with markets now betting on a possible 25-basis-point reduction in November, and some speculation about a September cut.

The euro maintained its 0.3% overnight gains, trading at $1.0778 and heading for a fourth consecutive week of advances against the dollar. The dollar index showed little change, standing at 105.24.

BOE Governor Andrew Bailey indicated that rate cuts could exceed market expectations, highlighting the growing divergence in monetary policy between Europe and the U.S., where European rates are expected to decrease sooner and more sharply.

Market odds suggest a nearly even chance of a BOE rate cut in June, with a strong likelihood by August. The European Central Bank is also anticipated to cut rates in June with an 88% probability.

In Japan, the yen drew attention amid suspected government interventions to stabilize the currency, now trading at 155.51 per dollar. Japan's Finance Minister reiterated readiness to counteract disorderly movements in the currency market.

Commodity prices also saw an uptick, with U.S. crude oil increasing 0.63% to $79.76 per barrel and Brent crude rising 0.54% to $84.33. Spot gold gained 0.3%, reaching $2,352.92 an ounce.

(By Commoditiescontrol Bureau: 09820130172)

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