By Tom Westbrook
SINGAPORE (Reuters) – Asian stock markets hit fresh highs on Friday as investors priced in U.S. rate cuts due in September and sentiment was positive, while the euro hit a three-week high ahead of French elections.
The pound was firm at $1.2767 as Britain’s Labour Party was poised for a landslide election victory that would sweep it back to power after 14 years of Conservative rule. Elsewhere, the dollar was slightly weaker and Treasury yields were slightly higher in Tokyo as trading resumed after the US Independence Day holiday.
Japan’s Nikkei and the broader Topix both hit record highs, as did Taiwan’s benchmark index.
MSCI’s broadest index of Asia-Pacific shares outside Japan rose 0.2 percent to a two-year high, with Samsung’s estimate of a more than 15-fold increase in second-quarter profit also helping South Korea’s KOSPI hit a two-year high.
Singapore’s Straits Times Index, which is heavily weighted towards the banking and property sector, rose more than 3% in as many days and also hit two-year highs.
“Global liquidity remains ample and with the S&P (500) printing a ridiculous number of records these days… at some point, valuations elsewhere will make a compelling enough case,” said Vishnu Varathan, chief economist at Mizuho in Singapore.
He noted that demand for artificial intelligence had driven rallies by chipmakers in Taiwan and South Korea, interest rates were fueling record profits at Singapore’s big banks and a weak yen had been a tailwind for Japanese stocks.
Japanese household spending unexpectedly fell in May, government data showed Friday, complicating the outlook for interest rates, especially since one factor behind the decline is how the weak yen has limited consumers’ purchasing power.
The yen edged up to 160.9 per dollar. FTSE futures opened 0.3% higher on Friday and S&P 500 futures edged higher, suggesting a new record high for the currency index could be in sight later in the day.
FEATURED JOBS
U.S. jobs data will be at the heart of the economic agenda on Friday, with hiring expected to slow and unemployment expected to rise slightly, which would pave the way for an interest rate cut.
A string of disappointing data, with the US ISM index of services activity slipping to its lowest level since mid-2020 earlier this week, led markets to raise the probability of a September rate cut to 73% and price in 47 basis points of cuts this year.
Two-year US Treasury yields rose 1.3 bps to 4.71% in morning trading in Asia and benchmark 10-year yields rose 2 bps to 4.37%.
On the foreign exchange market, the euro rose to $1.0817 as polls indicate that France’s far-right National Party will fail to win an absolute majority in Sunday’s second round of legislative elections.
“If the polls ultimately prove accurate, it would mean that the most extreme policies of fiscal expansion and immigration restrictions are unlikely to be adopted,” said MUFG analyst Michael Wan.
The Australian dollar hit a six-month high of $0.6738 as yield spreads swung in its favour, supported by bets that the next move in Australian rates could be higher as inflation proves stubborn. (AUD/)
In commodities trading, a weak dollar helped gold post its biggest weekly gain in a month, up 1.4% to $2,357 an ounce. Oil is at its highest price since April, with Brent crude futures holding above $87 a barrel after a bigger-than-expected drop in U.S. crude inventories, suggesting firm demand as the U.S. summer driving season gets underway.
Bitcoin was down 2% and trading near a four-month low of $56,955.
(Edited by Jacqueline Wong)
