Asian markets saw a significant boost on Monday, driven by a surge in Hong Kong technology stocks.
With the possibility of lower US interest rates on the horizon, regional currencies climbed to their highest levels in five months against the US dollar.
Following their best week in over a year, Asian shares continued to climb. China’s equity markets edged up, while a Hong Kong tech index recorded its largest gain since August 9.
US equity futures also followed suit, reflecting the positive sentiment across the globe.
Meanwhile, the Bloomberg Asia Dollar Index rose by 0.5%, with Malaysia’s ringgit leading the pack.
The trading activity suggests a shift in investor sentiment, as concerns about a potential US recession ease.
Investors seem increasingly confident that borrowing costs could decline, a factor that’s lifting spirits across Asia.
The focus now turns to Friday, when Federal Reserve Chairman Jerome Powell is expected to provide crucial insights into the future of US monetary policy during the Fed’s annual meeting in Jackson Hole.
Recent trading trends indicate a short-term strategy among investors, with many buying into the expectation of a US rate cut.
The attractive valuations in Hong Kong are fueling this trend.
However, once the rate cut is confirmed, investors are likely to take quick profits and sell on the news.
Over the weekend, Goldman Sachs adjusted its forecast for a US recession in the next year, reducing the probability from 25% to 20%.
This adjustment comes on the back of encouraging retail sales and jobless claims data.
Goldman’s economists, led by Jan Hatzius, hinted that if the August jobs report, due on September 6, remains strong, they might further lower the recession risk to 15%.
Elsewhere in Asia, investors are keeping a close eye on central bank meetings in Indonesia and South Korea, hoping for signs of policy easing.
Thailand’s monetary policy decision will be especially critical, given speculation that the new prime minister might scrap a major stimulus package.
In Japan, Bank of Japan Governor Kazuo Ueda is set to address a special session in parliament this week, likely discussing the impact of the July 31 rate hike, which rattled global markets.
Notably, hedge funds have turned bullish on the yen for the first time since 2021, marking a dramatic shift from the bearish outlook seen just last month.
On Monday, the yen strengthened by 0.5% against the dollar.
In China, authorities are expected to maintain the 1- and 5-year loan prime rates on Tuesday, following the People’s Bank of China’s recent pledge to support economic recovery.
However, officials have cautioned against implementing “drastic” measures.
Chinese automakers, including Xpeng Inc., Geely Automobile Holdings Ltd., and Xiaomi Corp., are expected to report higher vehicle sales.
But they face mounting challenges as competition intensifies and the European Union presses forward with tariffs.
In commodities, oil prices declined for the fourth time in five sessions, influenced by US-led efforts to secure a ceasefire in the Middle East and the escalating Russia-Ukraine conflict.
Gold hovered near record highs on hopes of a Fed rate cut, while iron ore experienced its worst week since early June amid concerns over a crisis in China’s steel industry.
The business community in Asia will be closely watching these developments, as they could signal broader trends in the global economy and markets.
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