Asian stocks take heart from the hope of ECB and Fed rate cuts

Tokyo — The expectation that the European Central Bank and Federal Reserve will cut interest rates boosted stocks globally, while the pound sagged on worries that likely new prime minister Boris Johnson would lead Britain into a no-deal exit from the EU.

MSCI’s broadest index of Asia-Pacific shares outside Japan gained 0.15%. Japan’s Nikkei rose 0.95%.

The Shanghai Composite Index edged up 0.2%. Australian stocks added 0.4% and South Korea’s KOSPI gained 0.45%.

The S&P 500 edged up towards a record high overnight, supported by expectations that the Federal Reserve would cut interest rates at its July 30-31 policy meeting.

European stocks had also nudged higher on Monday with the European Central Bank seen cutting rates by 10 basis points on Thursday.

But with central bank easing no longer a fresh theme, market gains were limited.

“The likelihood of easing by the Fed is supportive for equity markets, but the probability of a 25-basis point rate cut has already been factored in for the most part,” said Soichiro Monji, senior strategist at Sumitomo Mitsui DS Asset Management.

In currency markets, the pound was 0.1% lower at $1.2465 and headed for its third session of losses.

Sterling was under pressure due to the likelihood that Britain’s ruling Conservative Party would elect eurosceptic Johnson as its new leader and prime minister, replacing Theresa May. The result of the weeks-long internal party election will be announced on Tuesday.

Some investors are worried Johnson could pull Britain out of the EU on October 31 without a trade deal in place in order to appease hardline anti-EU members of his Conservative Party.

The dollar index against a basket of six major currencies rose 0.15% to 97.380, helped by a rise in US yields. The greenback gained 0.15% to ¥108.040.

The euro dipped 0.1% to $1.1197 weighed by the possibility of easing by the ECB.

Source: businesslive.co.za