Asian Markets Surge on Renewed Fed Rate Cut Optimism
Financial markets across Asia experienced a significant upswing on Wednesday, propelled by growing anticipation that the United States Federal Reserve will implement an interest rate reduction next month. This optimistic sentiment was fueled by a series of recently released, softer-than-expected economic indicators from the US, which suggest a cooling economy and reinforce the case for monetary policy easing.
Weak US Data Strengthens the Case for Easing
The rally in Asia mirrored an upbeat session on Wall Street, as investors digested a batch of delayed US data that pointed towards economic deceleration. According to news agency AFP, several Fed policymakers have already voiced support for a third consecutive rate cut, expressing concerns about the labour market despite ongoing elevated inflation levels.
Fresh data revealed that private employers in the US shed an average of 13,500 jobs per week in the four weeks leading to 8 November, as reported by payroll firm ADP. In a further sign of a slowdown, retail sales growth lost momentum and consumer confidence plummeted to a seven-month low.
Stephen Innes of SPI Asset Management commented to AFP that while this backlog of data was "extremely stale", markets hungry for macroeconomic signals were interpreting it as a dovish sign for future policy. He also highlighted that Goldman Sachs economists had trimmed their third-quarter GDP tracking to 3.7%, supporting the narrative that economic growth is moderating ahead of the Fed's crucial December meeting.
Political Appointments and Broad Market Gains
Risk appetite received an additional boost from a Bloomberg report indicating that Kevin Hassett, a close ally of President Donald Trump, is considered the frontrunner to replace current Fed Chair Jerome Powell next year. Analysts believe his potential appointment would align with President Trump's public push for lower interest rates.
In response, Asian stock markets posted sharp gains. Tokyo and Seoul led the charge, each climbing around 2%. Other major markets, including Hong Kong, Shanghai, Sydney, Singapore, Taipei, and Wellington, also traded firmly in positive territory. This advance helped markets recover from a pullback earlier in the month driven by concerns over high valuations in the technology sector. Notably, Chinese e-commerce behemoth Alibaba slipped more than 1% after reporting a decline in profit, attributed to increased consumer subsidies and investments in artificial intelligence.
The MSCI's broadest index of Asia-Pacific shares excluding Japan rose by a solid 1%, while Japan's Nikkei index jumped 1.8%. Analysts at Westpac noted that market sentiment improved dramatically as traders now price in an 80.7% probability of a 25-basis-point cut at the Fed's 10 December meeting, a significant increase from the even odds seen just a week earlier.
Oil Prices Rebound and Commodity Outlook
Meanwhile, in the commodities space, oil prices staged a mild rebound after suffering sharp losses on Tuesday. Brent crude rose 0.3% to $62.67 per barrel, and West Texas Intermediate (WTI) gained 0.24% to $58.09. This stabilization followed indications that Ukraine is close to agreeing to a US-backed peace plan with Russia.
Tony Sycamore of IG told Reuters that a finalized deal could "rapidly dismantle Western sanctions on Russian energy exports", a development that could potentially push WTI prices towards $55 unless the negotiations break down. US President Trump has reportedly instructed his representatives to meet with both Russian and Ukrainian officials, and Ukrainian President Zelenskiy may soon visit the US to finalize an agreement.
While recent sanctions remain tight, Reuters reported that Russian oil shipments to India are expected to hit a three-year low in December. The broader hopes for a Fed rate cut have also provided underlying support for crude prices, as lower borrowing costs typically stimulate economic activity and, consequently, demand for oil.
In other commodity markets, gold traded 0.2% higher at $4,131.78, and Bitcoin rose 0.5% to $87,438.53.
