Asian stocks are on track to break a two-week downward trend as of Friday, buoyed by recent rate cuts initiated by major central banks. The moves by these banks have fueled anticipation that the U.S. Federal Reserve might also consider lowering rates in the near future.
The European Central Bank (ECB) implemented a widely anticipated rate cut on Thursday, following the Bank of Canada’s decision to become the first G7 nation to reduce its primary policy rate. This series of rate cuts has sparked discussions about potential further easing measures by other central banks, including the U.S. Federal Reserve.
The Bank of Canada and the European Central Bank (ECB) have joined Sweden’s Riksbank and the Swiss National Bank in initiating their monetary easing cycles. This collective action has revitalized the global risk rally, with growing speculation that the U.S. Federal Reserve may follow suit with rate cuts expected in September.
“You’ve got two of the G7 cutting rates … it certainly opens the door further to the Fed,” stated Tony Sycamore, market analyst at IG. “We’re not in the home straight, but we’ve certainly rounded the corner.”
MSCI’s broadest index of Asia-Pacific shares outside Japan followed the upward trend of global stocks, increasing by 0.3% in early Asian trading. The index appeared poised for a weekly gain of nearly 3%.
Hong Kong’s Hang Seng Index also saw a slight increase of 0.14%, while Chinese blue chips edged up by 0.23%. Market activity remained subdued as traders exercised caution in anticipation of Friday’s U.S. nonfarm payrolls report. Expectations are for the world’s largest economy to have added 185,000 jobs last month.
“Equities, in all likelihood, would rally strongly on that, and that would reflect across the region. You’ll likely see the dollar losing a little bit of strength from that.”
