Asia stocks start tepid after three-day rally
Federal Reserve rate cut
next month.
Japanese indexes retreated while South Korea advanced. Chinese equities will be in focus after a gauge of US-listed Chinese shares rose for a second session, helped by earnings from Tencent Holdings Ltd. US stocks closed at a record as Apple Inc. and Amazon.com Inc. climbed. Bitcoin reached an all-time high. Treasuries were steady Thursday after rallying in the prior session. The dollar fell for a third consecutive day.
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Stocks have soared to record levels and volatility has slumped to multi-year lows as traders now fully expect a quarter-point move by the Fed after an inflation print earlier this week was seen as benign. External pressure is also coming from President Donald Trump's administration with Treasury Secretary Scott Bessent making his most explicit demand yet for the central bank to execute a cycle of cuts.
'As the labor market continues to weaken, we think the US central bank will resume interest rate cuts next month, with 25-basis-point cuts at each meeting through January 2026 for a total of 100 basis points,' said Ulrike Hoffmann-Burchardi at UBS Global Wealth Management.
Bessent — who suggested the central bank's benchmark rate ought to be at least 1.5 percentage points lower than it is now — said officials might have cut rates if they'd been aware of the revised data on the labor market that came out a couple of days after the latest meeting.
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'We could go into a series of rate cuts here, starting with a 50 basis-point rate cut in September,' he said in a television interview on
Bloomberg
Surveillance
Wednesday.
The Federal Reserve Open Market Committee last month kept their benchmark at a target range of 4.25% to 4.5%.
'There is scope for the FOMC to take a more dovish tone next year, particularly if Powell chooses to give up his position as governor once his stint as chair comes to an end,' Jane Foley, strategist at Rabobank in London, wrote in a note.
Bessent also added that the Bank of Japan is falling behind the curve in addressing inflation, in a rare comment admonishing policy decisions by a foreign central bank. The yen was 0.4% stronger against the dollar early Thursday.
Meanwhile, Trump, who has also criticized the Fed for not easing the rates, said he may name the next Fed chair 'a little bit early' and added that he was down to three or four potential candidates as he looks for a successor to Powell.
A report on producer prices due Thursday will offer insights on additional categories that feed directly into the Fed's preferred price gauge — which is scheduled for later this month.
'As the market continues to digest the shift in the trajectory of the real economy following the combination of July's inflation and employment data, it follows intuitively that the question has become: how large of a cut should Powell deliver?' said Ian Lyngen at BMO Capital Markets.
In other corporate news, Trump's controversial plan to take a cut of revenue from chip sales to China has US companies reconsidering their plans for business with the country, offering a model for circumventing years of trade tensions.
Elsewhere,
geopolitical tensions
remained on edge after the US president warned he would impose 'very severe consequences' if Vladimir Putin didn't agree to a ceasefire agreement later this week, following a call with European leaders ahead of his meeting with the Russian president
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