Stocks in Asia edged higher ahead of key events from the Federal Reserve and the Bank of Japan that will help define the global rates trajectory.
The MSCI Asia Pacific Index climbed 0.2% as benchmarks in Japan, Australia and South Korea rose. That came after the S&P 500 and Nasdaq 100 indexes advanced on further signs the Fed will cut interest rates.
Minutes from the latest Fed policy meeting showed several officials acknowledged a plausible case for cutting rates, before the central bank voted to keep them steady. Chair Jerome Powell will have a chance to offer investors further clarity when he speaks in the Jackson Hole economic symposium on Friday.
“The Fed minutes removed all doubt about a September rate cut,” said Jamie Cox at Harris Financial Group. “The Fed’s communication strategy is to make its meetings less of a market moving event, and they are following the script to the letter.”
The yen was little changed after a fourth session of gains. BOJ Governor Kazuo Ueda will face intense market scrutiny on Friday when he speaks to lawmakers, after the central bank’s rate hike and hawkish signals contributed to the global market turmoil earlier this month.
US government debt was steady in early Asian trading after gains for short-dated Treasuries in the prior session sent two-year yields falling almost 10 basis points before paring the move. Traders were once again pricing in more than 1 percentage point worth of Fed easing by the end of 2024, starting next month.
A likely revision to US job growth added further evidence for traders to expect a September rate cut. The number of workers on payrolls will probably be revised down by 818,000 for the 12 months through March — or around 68,000 less each month — according to the Bureau of Labor Statistics’ preliminary benchmark revision. It was the largest downward revision since 2009.
Elsewhere, China launched an anti-subsidy investigation into dairy imports from the European Union, as trade tensions escalated between the two sides. The probe will target several dairy products, including fresh and processed cheese, China’s Ministry of Commerce said in a statement Wednesday.
Jackson Hole
To Jennifer McKeown at Capital Economics, central bankers are unlikely to offer much forward guidance at the Jackson Hole economic symposium, preferring to stress their “data dependence.”
“Since most economies are expanding, inflation is easing back to target and financial markets have stabilized after the recession scare a few weeks ago, there is less pressure for them to steer markets than there has been around past events,” she noted. “But they risk keeping rates too high for too long.”
In commodities, oil steadied on Thursday after slumping in the session before. Gold was also little changed after trading near a record high on the expectations of a Fed interest rate cut.
