SINGAPORE – Global stock markets reached new record highs on Thursday, with indices from Tokyo to New York posting gains. Investors are eagerly anticipating U.S. inflation data, which is expected to show a slowdown, potentially leading to interest rate cuts in September.
Market Performance
Technology shares led the rally, pushing the S&P 500 (.SPX) up 1% to a sixth consecutive record close. In Asia, Japan’s Nikkei (.N225) also surged 1% to a record 42,426. MSCI’s broad index of Asia-Pacific shares outside Japan (.MIAPJ0000PUS) climbed 1% to a two-year high, while Taiwan’s stock market (.TWII) reached an all-time peak, and Australia’s ASX 200 (.AXJO) neared its record high.
Interest Rate Speculation
Shane Oliver, chief economist and head of investment strategy at AMP in Sydney, noted, “The main driver is really the prospect of interest rate cuts. If we get a good inflation read, it will tick one of Powell’s boxes.”
U.S. Federal Reserve Chair Jerome Powell indicated to lawmakers that positive economic data would support the case for interest rate cuts. Futures markets are pricing in a 75% chance of a rate cut in September. Economists predict that the annual U.S. Consumer Price Index (CPI) slowed to 3.1% in June from 3.3% in May.
The Bank of Korea maintained its interest rates, with Governor Rhee Chang-yong suggesting preparations for potential rate cuts. Similarly, the Reserve Bank of New Zealand signaled a shift towards rate cuts, leading to a significant re-pricing in expectations.
Upcoming Events
Malaysia is expected to keep its rates steady later in the day. The U.S. earnings season is also starting, with Delta Air Lines (DAL.N) and consumer giant PepsiCo (PEP.O) reporting their results, followed by major banks on Friday.
China’s Market Challenges
Chinese stocks rose on Thursday, but ongoing disappointing data and tariff concerns have made sustained rallies difficult. China’s GDP data, due on Monday, will be closely watched. The Hang Seng (.HSI) in Hong Kong rose 1%, while the mainland’s blue-chip CSI300 (.CSI300) increased by 0.4%.
China’s yuan remained steady at 7.2738 per dollar, near an eight-month low.
Currency and Bond Markets
Ahead of the U.S. CPI release, currency movements were modest. The euro inched up to $1.0835, and the British pound reached a one-month high of $1.2854. The Japanese yen hovered at 161.58 per dollar, with Japan’s core machinery orders unexpectedly falling for the second consecutive month.
The New Zealand dollar stabilized at $0.6095, and the Australian dollar rose 0.2% to a six-month high of $0.6763. U.S. Treasury yields remained steady, with two-year yields at 4.62% and 10-year yields at 4.29%.
Commodities
Oil prices edged higher due to strong U.S. gasoline demand, with Brent futures rising 0.4% to $85.43 a barrel and U.S. crude climbing 0.5% to $82.47 a barrel. Wheat futures were pressured near two-and-a-half-month lows due to favorable U.S. weather. Gold increased by 0.2% to $2,373 an ounce, while Bitcoin steadied around $58,900 after last week’s selloff.
