Mumbai, 28 Jun (Commoditiescontrol): Asian stocks are poised for a fifth consecutive monthly gain on Friday, driven by increasing optimism that cooling U.S. inflation will prompt the Federal Reserve to ease interest rates later this year.
Friday brings significant market events after a relatively calm week. Notably, the first U.S. presidential debate between Democratic President Joe Biden and Republican rival Donald Trump took place in Atlanta, setting the stage for the upcoming November elections.
Chinese markets had a rocky start as investors were cautious about potential comments from the candidates regarding trade relations with Beijing, which have soured in recent years. Both Biden and Trump have maintained a tough stance on trade, imposing and threatening tariffs on China.
Hong Kong's Hang Seng Index was down 0.1%, while China's benchmark edged 0.05% lower. MSCI's broadest index of Asia-Pacific shares outside Japan dipped 0.03%, yet it was on track to achieve a 3.1% monthly gain, its best performance since February.
Investors are eagerly awaiting the U.S. core personal consumption expenditures (PCE) price index data for May, set to be released later on Friday. This index, the Fed's preferred measure of inflation, could provide further insights into the U.S. rate outlook.
Rising expectations of an imminent Fed easing cycle and the momentum from the artificial intelligence boom have fueled a risk rally across stock markets, propelling Wall Street to record highs and consequently lifting Asian shares. According to the CME FedWatch tool, traders are now pricing in a 64% chance of the first Fed rate cut in September, up from 50% a month ago.
S&P 500 futures and Nasdaq futures both edged higher, rising 0.23% and 0.41%, respectively. Meanwhile, the dollar gained strength in currency markets, pushing the Aussie down 0.4% to $0.6621. The euro dipped 0.16% to $1.0687, heading for a 1.5% monthly decline amid political turmoil in the eurozone, with France's snap election set to begin this weekend.
The yen plummeted to a new 38-year low on Friday, hitting 161.27 per dollar, its weakest since 1986. The Japanese currency has fallen approximately 2.3% this month and over 12% this year against the resilient dollar, impacted by significant interest rate differentials between the U.S. and Japan. This dynamic has bolstered the yen's use as a funding currency for carry trades, where investors borrow in a low-interest-rate currency to invest in higher-yielding assets.
The yen's decline has benefited the Nikkei, which rose more than 1%, eyeing a monthly gain of over 3%. Data showed that core consumer prices in Japan's capital increased by 2.1% in June from a year earlier, underscoring the Bank of Japan's challenge in timing its next interest rate hike.
In commodity markets, gold struggled under the pressure of a strong dollar, falling 0.26% to $2,321.19 per ounce. Brent crude oil futures rose 0.39% to $86.73 per barrel, while U.S. West Texas Intermediate crude futures gained 0.42% to $82.08 per barrel.
(By Commoditiescontrol Bureau: 09820130172)
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