By Tom Westbrook
SINGAPORE (Reuters) – Asian stock markets hit fresh highs on Friday as investors looked ahead to U.S. rate cuts in September and the mood was upbeat, while the euro hit a three-week high ahead of French elections.
Sterling held firm at $1.2767 as Britain’s Labour Party headed for a landslide election victory that would take it to power after 14 years of Conservative rule. Elsewhere, the dollar weakened slightly and Treasury yields rose slightly in Tokyo as trading resumed after the U.S. Independence Day holiday.
Both Japan’s Nikkei and the broader Topix index rose to record highs, as did Taiwan’s benchmark index.
MSCI’s index of Asia-Pacific shares outside Japan rose 0.2% to a two-year high, and Samsung’s estimate of a more than 15-fold increase in second-quarter profit helped South Korea’s KOSPI also hit a two-year high.
Singapore’s Straits Times Index, which is heavily weighted towards banking and property, has risen more than 3% in just a few days and also hit a two-year high.
“Global liquidity remains abundant and with the S&P (500) hitting a ridiculous amount of records these days… at some point valuations elsewhere will make a compelling enough argument,” said Vishnu Varathan, chief economist at Mizuho in Singapore.
He noted that demand for artificial intelligence had fueled gains at chipmakers in Taiwan and South Korea, that rising interest rates were fueling record profits for Singapore’s big banks and that a weak yen had been a tailwind for Japanese stocks.
Japanese household spending unexpectedly fell in May, government data showed on Friday, complicating the outlook for interest rates especially since one of the factors behind the drop has been the way the weak yen has dampened consumer spending power.
The yen edged up to 160.9 per dollar. FTSE futures opened 0.3% higher on Friday and S&P 500 futures edged up slightly, suggesting a new record for the spot index could be reached later in the day.
JOBS IN FOCUS
US jobs data tops the economic calendar on Friday. A slowdown in hiring and a slight rise in unemployment are expected, which would leave the door open for rate cuts in the US.
A string of dovish data, with the ISM gauge of US services activity falling to its lowest level since mid-2020 earlier in the week, saw markets raise the probability of a September rate cut to 73% and price in 47 basis points of cuts this year.
Two-year US Treasury yields rose 1.3 bps to 4.71% in Asian morning trade and benchmark 10-year yields rose 2 bps to 4.37%.
In currency markets, the euro rose to $1.0817 as polls indicated France’s far-right National Party will fail to secure an absolute majority in Sunday’s second round of parliamentary elections.
“If the polls turn out to be accurate, this would mean that more extreme policies of fiscal expansion and immigration restrictions are unlikely to be approved,” said MUFG analyst Michael Wan.
The Australian dollar hit a six-month high of $0.6738 as yield spreads swung in its favour, supported by bets that the next move in Australian rates could be higher, given stubborn inflation. [AUD/]
In commodities trading, a weakening dollar has led gold to post its biggest weekly gain in a month, up 1.4% to $2,357 an ounce. Oil is at its highest level since April, with Brent crude futures above $87 a barrel following a bigger-than-expected drop in U.S. crude stocks, suggesting firm demand as the U.S. summer driving season gets underway.
Bitcoin fell 2% and was trading near a four-month low of $56,955.
(Edited by Jacqueline Wong)