Asian stock markets remained stable on Monday, anticipating central bank meetings that are anticipated to result in a pair of interest rate reductions. This comes against the backdrop of crucial U.S. inflation data that is expected to support further monetary easing. Trading was subdued due to a holiday in Japan, and MSCI's broadest index of Asia-Pacific shares outside Japan was virtually unchanged, following a 2.7% surge last week.
Although Japan's Nikkei was closed for the holiday, futures indicated a slight advance, aligning with the index's 3.1% weekly rally. This was spurred by a softer yen and the Bank of Japan's (BOJ) indication of a cautious approach to further tightening. S&P 500 and Nasdaq futures each rose by 0.1%, with the S&P 500 up 0.8% in September and 19% year-to-date, reaching new all-time highs.
The Federal Reserve's recent half-point rate cut has kept markets optimistic, with futures suggesting a 51% chance of another significant move in November. Barclays economist Christian Keller noted the Fed's unusual step of initiating a rate cut cycle with a 50bp move without an immediate financial crisis or job losses, reflecting the Fed's commitment to a soft economic landing.
With several Fed policymakers, including Chair Jerome Powell, scheduled to speak this week, attention is also focused on the core personal consumption expenditures (PCE) data due on Friday. Analysts predict a 0.2% monthly increase, which would bring the annual rate to 2.7%.
The Swiss National Bank and Sweden's central bank are both expected to deliver rate cuts in the coming week, while the Reserve Bank of Australia (RBA) is likely to maintain its current rate as inflation remains high.
In currency markets, the dollar inched up against the yen, while the euro gained ground against both the yen and the dollar. In Japan, the election of a new leader for the ruling LDP party is set for September 27, with the winner succeeding Prime Minister Fumio Kishida.
U.S. political negotiations to avoid a government shutdown are also being closely watched, as the current funding is set to expire on September 30. In commodities, gold prices remained near their all-time high, supported by the U.S. rate cut and lower bond yields, while oil prices were steady following a 4% weekly increase due to hopes of bolstered global economic growth and demand.
