SINGAPORE, July 5 (Reuters) – Asian share markets scaled
new highs on Friday as investors sized up U.S. rate cuts for
September and the mood was upbeat, while the euro hit a
three-week peak ahead of French elections.
Sterling was firm at $1.2767 as Britain’s Labour
Party was set for a landslide poll victory that will sweep it to
power after 14 years of Conservative rule. Elsewhere, the dollar
was slightly weaker and Treasury yields marginally higher in
Tokyo, as trade resumed after the U.S. Independence Day holiday.
Japan’s Nikkei and broader Topix both nudged
up to record levels, as did Taiwan’s benchmark.
MSCI’s broadest index of Asia-Pacific shares outside Japan
rose 0.2% to a two-year high with Samsung’s
estimate of a more than 15-fold rise in second-quarter profit
helping South Korea’s KOSPI to a two-year peak as well.
Singapore’s bank and property heavy Straits Times index is
up more than 3% in as many days and also struck two-year
highs.
“Global liquidity remains flush and with the S&P (500)
printing a ridiculous number of records these days…at some
point valuations elsewhere will make a compelling enough case,”
said Vishnu Varathan, chief economist at Mizuho in Singapore.
He noted artificial intelligence demand had driven chipmaker
rallies in Taiwan and South Korea, that interest-rate settings
were fuelling record profits for Singapore’s big banks and that
a weak yen had been a tailwind for Japanese equities.
Japanese household spending unexpectedly fell in May,
government data showed on Friday, complicating the interest rate
outlook especially as one of the factors behind the drop has
been how the weak yen has curbed consumers’ purchasing power.
The yen rose slightly to 160.9 per dollar. FTSE
futures opened 0.3% higher on Friday and S&P 500 futures
were up ever so slightly to suggest a fresh record for
the cash index may be in store later in the day.
JOBS IN FOCUS
Employment data in the U.S. headlines the economic calendar
on Friday. A slowdown in hiring and small uptick in unemployment
is forecast, which would leave open the door for U.S. rate cuts.
A run of subdued data, with the U.S. ISM measure of services
activity sliding to its lowest since mid-2020 earlier in the
week, had markets lifting the probability of a rate cut in
September to 73% and pricing 47 basis points of cuts this year.
Two-year U.S. Treasury yields rose 1.3 bps to
4.71% in the Asia morning and benchmark 10-year yields
were up 2 bps to 4.37%.
In currency markets, the euro rose to $1.0817 as
polls point to France’s far right National Party falling short
of an absolute majority at Sunday’s parliamentary election
runoff.
“If the polls eventually prove accurate, this would mean the
more extreme policies of fiscal expansion and immigration curbs
are unlikely to pass,” said MUFG analyst Michael Wan.
The Australian dollar notched a six-month high of
$0.6738 as yield spreads swung in its favour, underpinned by
wagers that the next move in Aussie rates might be up given
inflation is proving stubborn.
In commodity trade, a weaker dollar has gold on
course for its largest weekly rise in a month, up 1.4% to $2,357
an ounce. Oil is its most expensive since April with Brent crude
futures holding above $87 a barrel following a
bigger-than-expected drop in U.S. crude stocks, which suggest
firm demand as the U.S. summer driving season gets under way.
Bitcoin was down 2% and trading close to a four-month
low at $56,955.
(Editing by Jacqueline Wong)
