Asian Markets Extend Rally as US Inflation Data Fuels Rate Cut Hopes

Asian equity markets continued their upward trajectory for the seventh consecutive day, buoyed by positive US economic data and growing expectations of Federal Reserve rate cuts. The rally in Asian shares has pushed MSCI's Asian shares gauge close to record levels, mirroring the performance of US markets where both the S&P 500 and Nasdaq 100 reached new closing highs.

US Inflation and Employment Data

The latest US economic indicators have strengthened the case for potential interest rate cuts by the Federal Reserve. The core consumer price index (CPI) in August rose by 0.30% month-over-month and 3.10% year-over-year, aligning with economist forecasts. This data suggests that inflationary pressures, while still present, are not accelerating beyond expectations.

In a seemingly contradictory development, US jobless claims jumped to nearly four-year highs. This unexpected rise in unemployment claims has further reinforced market expectations for Federal Reserve rate cuts.

Market Reactions

The combination of controlled inflation and weakening employment data has led to increased optimism in equity markets:

• Asian shares extended their rally, approaching record levels
• S&P 500 and Nasdaq 100 both achieved fresh closing highs
• Treasury yields remained steady, with the 10-year yield hovering around 4.03%
• Market analysts are now anticipating a potential rate cut, with additional cuts likely later

Corporate Highlights

Several major companies saw significant movements:

• Microsoft shares gained after reaching an agreement with OpenAI
• Adobe advanced on the back of a strong quarterly revenue outlook
• Hyundai Motor announced delays at a US battery plant, citing immigration raids and labor shortages

Commodities

The commodities market showed mixed results:

• Oil prices declined for the second consecutive day amid a weakening market outlook
• Gold prices stabilized after recent declines

Looking Ahead

As Asian markets continue their impressive run, investors will be closely watching the upcoming Federal Reserve meeting. The potential for interest rate cuts could further fuel market optimism, although concerns about economic slowdown persist. The interplay between inflation data, employment figures, and central bank policies will likely remain key drivers of market sentiment in the near term.

Market participants should remain vigilant, as the current rally may be sensitive to any unexpected shifts in economic data or policy decisions. The coming weeks will be crucial in determining whether this positive momentum can be sustained across global equity markets.