Asian Market Surge, Gold Nears Record on Fed Rate Cut Bets
On Thursday, tech shares experienced a significant rally, propelling Asia stock indexes upward. Meanwhile, gold remained close to a record high, and the dollar struggled as a disappointing US labor market report strengthened expectations for interest rate cuts by the Federal Reserve. The US government shutdown has made it almost certain that the important monthly payrolls data will not be released on Friday. However, the private ADP employment report revealed that the economy unexpectedly lost jobs in September, with the previous month also revised to show a decline. Despite the absence of official labor data, the disappointing ADP report led traders to anticipate quarter-point Fed rate cuts at both of the remaining policy meetings of the year as nearly certain.
On Wednesday, the assurance of a more favorable policy landscape propelled Wall Street to new record highs, while the Philadelphia SE semiconductor index surged by over 2 percent. Shares in the chip sector played a significant role in driving Japan’s Nikkei to an increase of approximately 0.5 percent. Taiwan’s tech-heavy bourse surged by 1.5 per cent, while South Korea’s KOSPI soared 2.8 per cent following partnerships between chip giants Samsung and Hynix to supply OpenAI data centres. Hong Kong’s Hang Seng increased by 0.5 percent. “The ADP report suggests the US economy is in almost dire need for further policy support,” and as a result, “the markets are discounting a much higher probability of rate cuts in October and December,” stated Kyle Rodda. Meanwhile, “after some initial jitters, the markets shrugged off the US government shutdown, at least for now,” he added.
“Historically, the impact of shutdowns has been trivial,” although “the delay of critical economic data could increase uncertainty about the path forward for US monetary policy – and therefore lift volatility,” Rodda said. The government ceased many of its operations on Wednesday due to significant partisan divisions that hindered Congress and the White House from finalizing a funding agreement, initiating what may become a prolonged and challenging standoff. The interplay of Fed easing expectations and concerns over a potential shutdown propelled gold to a new all-time high of $3,895.09 overnight, concurrently bolstering US Treasuries and resulting in a significant decline in yields. The two-year Treasury yield fell to a two-week low of 3.531 percent on Thursday during Tokyo trading hours. Gold took a moment to stabilize, last trading at approximately $3,865.
The US dollar index, which monitors the currency’s performance against six major counterparts, remained close to the one-week low of 97.459 that was recorded overnight. It last stood at 97.672, a slight decrease from Wednesday’s closing level. The dollar remained relatively stable at 147.01 yen, after experiencing a significant 1.8 percent decline over the past three days. The euro increased modestly to $1.1738, while sterling also edged higher to $1.34835. Oil prices increased slightly amid expectations of stricter sanctions on Russian crude, aiming to break a three-day losing streak that has brought them to 16-week lows. Brent crude futures increased by 0.2 percent, reaching $65.50 a barrel, while US West Texas Intermediate crude also rose by 0.2 percent to $61.92 a barrel.
