Expectations of a US rate cut drive global markets higher

E-mini futures for the S&P 500 index were 0.3% higher, indicating a higher opening on Wall Street later in the day.

“Despite a rather lacklustre earnings season so far, investors are focusing on the prospect of a considerably easier monetary policy, which is why we see stocks ready to open higher this morning,” said Konstantinos Anthis, head of research at ADSS.

Will rate cut suffice?

MSCI’s broadest index of Asia-Pacific shares outside Japan was up 1%, bouncing back from the previous day’s losses, while Japan’s Nikkei advanced 2%.

Elsewhere in Asia, the Shanghai Composite Index rose 0.8%, Australian stocks added 0.75% and South Korea’s Kospi gained 1.4%.

For the week, the MSCI ex-Japan index climbed a modest 1%, as riskier assets were partly capped by US President Donald Trump’s reiteration of his threat to impose further duties on Chinese imports.

The two sides resumed talks recently to seek an end to a year-long trade war that has rattled financial markets and slowed global growth. But most analysts do not expect an agreement any time soon, with some predicting a strong risk of further tariff escalation.

“Although central banks around the world have embarked on policy-easing in a bid to support their respective economies, investors are left to ponder whether the stimulus will be enough to offset the effects from heightened US-China trade tensions,” said Han Tan, market analyst at FXTM.

The dollar index against a basket of six major currencies stood about 0.1% higher at 96.875 after losing roughly 0.5% overnight to a two-week low of 96.671 in the wake of the comments from the Fed’s Williams.

The euro was 0.15% lower at $1.1259 after climbing 0.45% the previous day.

US Treasury yields were lower across the board. The two-year yield was at 1.7894% after touching a two-week low of 1.7520%. The 10-year yield fell to a 10-day low of 2.023% and was last at 2.0465%.

In commodities, US crude oil futures reversed a large part of the previous day’s deep losses, briefly rising 1.45% to $56.10 per barrel before easing back to $55.81, up 0.9%.

Crude rallied after the reports on the Iranian drone. Oil prices had fallen on Thursday amid expectations that output would rise in the Gulf of Mexico as operations resumed following last week’s hurricane.

Spot gold eased 0.5% as investors locked in profits after bullion surpassed $1,450 an ounce for the first time in more than six years on dovish Fed signals and Middle East tension. 

Reuters