Asian Stocks Rise at Largest Pace in Two Weeks Following Interest Rate Cut Hints

SadaNews - Asian stocks rose at the largest pace in nearly two weeks, tracking the rise of Wall Street, after traders bolstered their bets that the Federal Reserve will cut interest rates next month, following comments from its chairman Jerome Powell.

The Asian stock index climbed by 1%, while the technology stock index in Hong Kong jumped by 2.7%, and stocks in Shanghai reached their highest levels in 10 years. In contrast, U.S. and European stock futures fell as investors trimmed some of the optimism from Friday ahead of pivotal events this week.

U.S. Treasury bonds also fell, reducing some of the gains made after Powell's speech, with yields on two-year bonds rising by one basis point to 3.71%. The dollar index increased by 0.1% after suffering its third consecutive weekly loss, while gold decreased.

Critical Tests for Optimism

Traders see an 84% chance of a rate cut next month, after Powell hinted in Jackson Hole at the possibility of easing monetary policy before inflation returns to the target level, amid a weak labor market.

However, this optimism will undergo important tests this week, including U.S. inflation data, the results of "NVIDIA", and the peak of the Asian corporate earnings season.

Hebei Chen, an analyst at "Vantage Markets," stated that "Powell's signal from desire to action will help bridge the underlying cracks in Asian markets, which are experiencing slight tremors," adding that "this new dose of optimism is likely to keep risk appetite high" until the next Federal meeting.

Market sentiment was weak ahead of Friday, with the S&P 500 index declining for five consecutive sessions in the longest losing streak since January, as Wall Street reduced its bets on an imminent rate cut. However, Powell's comments alleviated these concerns, leading U.S. stocks to surge strongly in the best day for the index since May.

What Do Bloomberg Analysts Say?

Garfield Reynolds, team leader of "MLIV" at "Bloomberg," stated that "currency traders have become more cautious after Powell's comments at Jackson Hole opened the door to a rate cut."

He added that "this highlights that upcoming inflation data and other economic indicators until mid-September's meeting may mean that the easing decision is not guaranteed yet."

Prepared for a Change in Course

In what may be his last speech in Jackson Hole at the head of the Fed, Powell presented the conflicting signals coming from the economy, stating that the impact of tariffs on prices is now clear, but questions remain as to whether this will fuel inflation more sustainably. He also described the current labor market situation, where both demand and supply for labor are declining, as "strange."

Jane Yuji, a multi-asset investment solutions specialist at "JP Morgan Asset Management" in Hong Kong, said: "It is clear that the Fed is now prioritizing concerns about employment weakness over inflation, and this is their strategy," adding that the message is "very clear" that the bank is prepared to change course.

Focus on China and NVIDIA Results

Chinese stocks remain in the spotlight amid growing concerns about whether the market can continue to rise under the pressures of trade tariffs and the deepening real estate crisis. Although steady progress may suggest a lower risk of a sudden correction, some analysts warn of a potential bubble.

Ho Min Li, Chief Macro Strategist at "Lombard Odier" in Singapore, stated: "Markets may expect, whether rightly or wrongly, an improvement in macroeconomic fundamentals, but the bull market will not be sustainable if inflation remains close to zero, and companies' pricing power is exposed to headwinds due to weak domestic demand."

"NVIDIA" is set to announce its quarterly results on Wednesday after the market closes. Traders hope that the results will alleviate concerns about AI spending and confirm that the recent market rally is not just a tech bubble.

With its large size, representing about 8% of the S&P 500 index, and its position at the heart of AI development, "NVIDIA" has become a key market indicator overall. Its data indicates that about 40% of its revenues come from tech giants like "Meta," "Microsoft," "Alphabet," and "Amazon."