Asian stock markets climbed on Wednesday, extending a global rally fueled by softer-than-expected US economic indicators that have heightened expectations for an interest rate cut by the Federal Reserve in December. The upbeat sentiment in Asia followed mild gains on Wall Street, as investors bet on looser monetary policy to support economic growth amid signs of cooling consumer activity.
The surge in Asian equities was driven primarily by recent US data releases showing weaker retail sales and declining consumer confidence. US retail sales increased less than anticipated, while consumer sentiment dipped, signaling potential slowdowns in the world’s largest economy. These figures have prompted traders to ramp up wagers on a Federal Reserve rate cut at its upcoming meeting on December 10. According to the CME Group’s FedWatch tool, the probability of a 25-basis-point reduction now stands at 80.7%, a significant jump from roughly even odds just a week prior.
Major Asian indices reflected the optimism. MSCI’s broadest index of Asia-Pacific shares outside Japan advanced 1.1%, while Japan’s Nikkei stock index jumped 1.9% in a strong session. Australian shares also participated in the rally, rising 0.8%. The positive momentum spilled over from the US, where the S&P 500 and Nasdaq Composite notched mild gains for the third straight day, reclaiming ground after an earlier dip.
Beyond equities, the market reactions were mixed across asset classes. US Treasury yields edged higher, with the benchmark 10-year note yield climbing to 4.0113% from a previous close of 4.002%, after briefly dipping below 4% earlier in the week. The dollar weakened, with the dollar index falling 0.2% to 99.686, while currencies like the New Zealand dollar surged 1.3% following a rate cut by its central bank. Oil prices stabilized after recent declines, with Brent crude futures up 0.4% at $62.72 per barrel, amid geopolitical developments including signs of a potential Ukraine-Russia peace deal.
Experts suggest that a Fed rate cut could have ripple effects across Asia, encouraging regional central banks to ease policy as well. Sat Duhra, a portfolio manager at Janus Henderson Investors, noted, “Once we start seeing more cuts from the U.S., that’s positive for our region.” This comes at a time when emerging markets in Asia are closely watching US moves to calibrate their own responses to global economic shifts.
The broader implications of these developments could influence investor strategies heading into the end of the year. With OPEC+ expected to maintain current output levels at its upcoming meeting, and ongoing uncertainties in global trade and geopolitics, markets remain vigilant. For now, the focus remains on the Fed’s potential pivot, which could provide a tailwind for risk assets worldwide.
As trading continues, analysts will monitor upcoming data releases for further clues on economic health and policy directions. Investors are advised to stay attuned to volatility, but the current rally underscores the interconnected nature of global financial markets.