Stocks take a breather, Fed rate-cut drumbeat weighs on dollar
MSCI's gauge of equities in Asia excluding Japan (.MIAPJ0000PUS), opens new tab lingered near its loftiest level since September 2021, taking cues from Wall Street, where the S&P 500 (.SPX), opens new tab and Nasdaq indexes (.IXIC), opens new tab hit new closing highs for the second straight day.
The MSCI All Country World Index (.MIWD00000PUS), opens new tab rose to a record high for the second straight session on Wednesday and was last nearly flat on Thursday.
Futures markets indicated that European and U.S. shares were poised for a muted start.
The dollar fell to a two-week low against a basket of major peers on shifting expectations of U.S. rate cuts, with comments from the U.S. Treasury Secretary Scott Bessent also sparking some wagers on an outsized 50 basis point cut.
Goldman Sachs expects the U.S. Federal Reserve to deliver three, 25-basis-point interest rate cuts this year and two more in 2026.
Traders are currently pricing in a near certainty of a rate cut in September, with odds of a more aggressive 50 bps cut rising to 7%, up from 0% a week earlier, per CME's FedWatch tool.
"A rate cut in September seems likely given the recent job market revisions," said Ben Bennett, APAC investment strategist at Legal and General Investment Management.
"But inflation data remains sticky, and there's no sign of a serious economic downturn, so the Fed will probably want to keep their options open for the rest of the year," he said.
The biggest mover in FX during Asian hours was the Japanese yen , which climbed to a three-week high of 146.38 per dollar after Bessent said in a media interview that that Bank of Japan will likely be raising interest rates as it is behind the curve in dealing with the risk of inflation.
The yen also firmed broadly against the euro and British pound.
BOJ Governor Kazuo Ueda has signalled readiness to keep raising rates but justified going slow on the view that "underlying inflation," which focuses on domestic demand and wages, remains short of the BOJ's target.
The BOJ has also been wary of raising rates before policymakers have more clarity on the impact of U.S. trade tariffs on the Japanese economy and corporate profits.
Optimism on monetary policy easing in the world's largest economy also powered cryptocurrency bitcoin to an all-time high of $124,480.82 with analysts also pointing to recent financial sector reforms as a tailwind for the asset class.
Bitcoin has risen 32% so far in 2025, and the second largest cryptocurrency, ether , has climbed 41% and is hovering just shy of its all-time high hit in November 2021.
In commodity markets, gold prices nudged up and crude oil prices were a tad higher after hitting a two-month low on Wednesday as investors kept their focus on the summit between U.S. President Donald Trump and Russian leader Vladimir Putin on Friday.
Trump on Wednesday threatened "severe consequences" if Putin did not agree to peace in Ukraine but also said that a meeting between them could swiftly be followed by a second one that would include Ukrainian President Volodymyr Zelenskiy.
In the past, Trump has said both sides will have to swap land to end fighting that has cost tens of thousands of lives and displaced millions.
"While lack of progress towards a ceasefire may lead to renewed threats of secondary oil tariffs/sanctions, we see limited risk of large disruptions in Russia supply," analysts at Goldman Sachs wrote in a note.
Investor are also awaiting U.S. producer price inflation data later in the day, followed by the retail sales report on Friday.
DBS analysts reckon that investors are likely to apply the "bad news-good news" rule, treating soft U.S. data as a cue for lower yields, a weaker dollar and stronger risk appetite while seeing stronger data as a brake to the easing narrative.
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