Stocks and Wall Street Futures Strengthen as More Easing Approaches, According to Reuters

By Wayne Cole

SYDNEY (Reuters) – Global stocks saw a rise in Asia on Monday, with anticipation building ahead of central bank meetings expected to announce two additional rate cuts. Key U.S. inflation figures are also on the horizon, which could signal further easing in monetary policy.

China’s central bank has reduced its 14-day repo rate by 10 basis points, shortly after failing to meet market expectations with no cuts to longer-term rates. Analysts suggested that this adjustment was merely aligning with an earlier reduction in 7-day repo rates. Nonetheless, stocks reacted positively, gaining 0.3%.

With Japan closed for a holiday, trading volumes were lower, yet MSCI’s broad index of Asia-Pacific shares outside Japan rose by 0.3%, recovering from a 2.7% increase the previous week. Notably, Singapore’s main index reached its highest level since late 2007.

Futures for Tokyo’s stock market indicate a potential increase, trading at 38,510 compared to a cash close of 37,723. The index enjoyed a 3.1% boost last week as the yen weakened and the Bank of Japan showed no immediate intention to tighten its policies.

EUROSTOXX 50 futures increased by 0.5%, while other European indices saw similar gains. The S&P 500 added 1% so far in September, historically its weakest month, but has surged 19% year-to-date, reaching record highs.

More than 20 billion shares traded on U.S. exchanges last Friday, marking the busiest session since January 2021. Analysts from Bank of America observed that the S&P typically rises an average of 21% in the 12 months following the onset of Federal Reserve rate cuts, provided that no recession occurs.

The market is still responding positively to the Federal Reserve’s recent half-point rate cut, with futures indicating a 50% probability of another significant move in November. Barclays economist Christian Keller emphasized the significance of this move, highlighting the Fed’s attempt to maintain global liquidity without triggering immediate economic turmoil.

This week, at least nine Fed officials, including Chair Jerome Powell, will deliver remarks that could influence market sentiment.

MORE CUTS ON THE HORIZON

Friday will bring the core personal consumption expenditures (PCE) inflation data, a key indicator for the Fed. Analysts are predicting a 0.2% rise month-on-month, pushing the annual rate to 2.7%, while the headline figure is expected to slow to 2.3%.

The week will also see global manufacturing surveys, along with U.S. consumer confidence and durable goods reports being released.

On Thursday, the Swiss National Bank will meet with expectations for a quarter-point cut, and a notable chance for a larger 50 basis point cut. Sweden’s central bank is also expected to consider easing measures in its upcoming meeting.

Conversely, the Reserve Bank of Australia is expected to maintain its rate at 4.35% during their meeting on Tuesday, as inflation remains a concern.

Investors are keeping a close watch on negotiations to avert a U.S. government shutdown, as the current funding arrangement is set to expire on September 30. A three-month stopgap funding bill has been proposed by Republican House Speaker Mike Johnson, pending a vote.

In currency markets, the U.S. dollar rose by 0.3% against the yen, rebounding by 2.2% after last week’s low. The euro saw a substantial increase against the yen, while remaining stable against the dollar.

Japan’s ruling party is set to elect a new leader on September 27, who will replace outgoing Prime Minister Fumio Kishida.

The recent U.S. rate cut and declining bond yields have supported gold prices, which have reached an all-time high. Long positions in gold futures hit a four-year peak last week, indicating potential for a near-term pullback.

Oil prices continued their upward trend, bolstered by geopolitical tensions in the Middle East. Prices increased around 4% last week due to hopes that lower borrowing costs will stimulate global economic growth. Oil futures recorded gains, with significant increases noted in recent trading.