By Vivek Kumar
Moving markets today: Asia tracks Wall Street’s surge, gold eyes best week in 5 months, oil prices rally, U.S. non-farm payrolls in spotlight
U.S. stocks reached new record levels as Jay Powell’s comments hinted that the Federal Reserve is nearing a point where it may consider adjusting monetary policy. In Asia, stocks also surged to their highest levels in seven months, aligning with global market trends. Oil prices rose due to increased demand from major consumers worldwide. All eyes are now on the upcoming nonfarm payrolls report, expected later on Friday, which will provide further insights into the U.S. rate outlook. This report is particularly significant following January’s surprising jobs report, which caught the markets off guard. Here are five key takeaways for your day.
Japan set to offer bumper pay hikes, paving way for BOJ stimulus exit
Japanese companies are gearing up to propose substantial pay hikes during annual wage talks with unions, ending by March 13, Reuters reported. This could lead to the central bank phasing out its exceptional monetary easing soon. Economists anticipate an average 3.9% raise for union workers at major firms, the highest in 31 years, raising expectations for the Bank of Japan to end negative interest rates by April.
Fed’s confidence in rate cuts growing, says Powell
Jay Powell, head of the Federal Reserve, said the central bank is nearing confidence in beginning interest rate cuts. Powell assured senators that the Federal Open Market Committee (FOMC) views its current monetary policy stance as appropriate, holding borrowing rates steady until there’s more evidence that headline inflation, at 2.4% in January, could align with the 2% target. Powell noted that once the Fed gains confidence, likely soon, it will reduce constraints to avoid recession. Analysts expect rate cuts by mid-June or late July.
Oil prices rally amid speculation of Fed rate cut
Oil prices surged driven by increased demand from the U.S. and China, the world’s top oil consumers, and positive signals from the U.S. Federal Reserve on potential rate cuts. Brent crude futures rose by 0.53% to $83.41 per barrel, while U.S. West Texas Intermediate crude futures increased by 0.71% to $79.44. U.S. gasoline inventories fell by 4.5 million barrels last week, and distillate stockpiles dropped by 4.1 million barrels, indicating strong demand.
What’s coming up
Now, the focus is on the eagerly awaited nonfarm payrolls report set to be unveiled later on Friday, offering more clues about the U.S. interest rate trajectory, especially following the remarkable jobs report from January that surprised the markets. This Friday’s labour market data release precedes an upcoming assessment of U.S. inflation anticipated for next week.
Asia markets mirror Wall Street’s positive trend
The S&P 500 index climbed by 1.04%, closing at 5,157.99 points, while the Nasdaq Composite surged by 1.51%, reaching 16,273.41. The Dow Jones Industrial Average experienced a modest rise of 0.33% to reach 38,788.63. In Asia, the Nikkei N225 index followed the global trend, increasing by 0.84%. Chinese stocks showed strength at the session’s start, with the CSI300 and the Shanghai Composite Index rising by 0.4% and 0.25% respectively. However, both indexes were expected to finish the week with little change. Hong Kong’s Hang Seng Index jumped more than 1%.
On the bond front, the two-year U.S. Treasury yield fell to a one-month low of 4.499% on Friday, reflecting expectations of imminent Fed rate cuts. The benchmark 10-year yield settled at 4.0923%. In commodity markets, Brent crude rose to $83.27 per barrel, gaining 31 cents, while U.S. crude increased by 40 cents to $79.33 per barrel. Spot gold decreased by 0.1% to $2,157 an ounce after hitting an all-time high of $2,164.09 in the previous session. The demand for gold was influenced by expectations of a forthcoming Fed easing cycle.
