Asian stocks surge into weekend with US rate cut ‘seemingly locked in’

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Investors are in a bullish mood thanks to a string of data showing the US labour market slowing and inflation remaining stable, giving the Federal Reserve room to cut interest rates.
Photo: ANGELA WEISS / AFP
Source: AFP

Asian markets surged again Friday, tracking record highs across Wall Street, after US inflation and jobs data all but set in stone a Federal Reserve interest rate cut next week.

The bullishness that has characterised trade for the past few weeks has ramped up since a series of reports indicating the labour market in the world’s biggest economy was slowing sharply.

Adding to that has been relief that a feared spike in inflation caused by US President Donald Trump’s tariffs has not so far emerged, giving the central bank room to loosen monetary policy.

And that trend continued Thursday with figures showing August consumer prices rose a little more than the previous month but in line with expectations, while jobless claims hit their highest level in four years.

A report last week revealed the economy added just 22,000 jobs in August, while revised data showed job growth was more than 900,000 fewer than previously reported in the year through March.

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Analysts said the readings mean the Fed is now putting most of its focus on supporting the labour market, rather than bringing inflation down to its two percent level. It currently stands at around three percent.

“Inflation is not getting closer to the Fed’s target, but… as labour market concerns grow more pressing, fears (that) price pressures will be persistent fade,” said Taylor Nugent, senior economist for markets, at National Australia Bank.

“There is nothing to stand in the way of Fed cuts this year.”

With all three main indexes on Wall Street hitting new heights, Asia was more than happy to pick up the baton heading into the weekend.

Hong Kong led the way, adding around 1.5 percent, helped by a surge of nearly seven percent in market heavyweight Alibaba.

The ecommerce titan’s New York stock had spiked eight percent on Thursday, helped by its latest moves in the artificial intelligence sector including raising US$3.2 billion to boost its AI budget.

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It also said it would ramp up spending on its core ecommerce business.

Seoul and Tokyo extended their record run this week, while Shanghai, Sydney, Seoul, Singapore, Taipei and Manila were also well in the green.

Traders are keenly awaiting the Fed’s policy meeting next week, with most expecting it to announce a 25-basis-point cut, though there are some rumblings of a 50-point reduction.

The post-gathering statement and comments from boss Jerome Powell will be closely watched for clues about its moves for the rest of the year and heading into 2026.

“The Fed is seemingly locked in and a done deal. While some may see the risk of potential disappointment if the Fed holds back from delivering a 50-basis-point cut, realistically, the prospects of an oversized 50-point move seems a tall order for the voting committee,” said Pepperstone’s Chris Weston.

“The base case is a 25-basis-point cut backed by a commitment to ease further in the meetings ahead.”