Stock Markets in Asia Exhibit Mixed Trends in Anticipation of U.S. PCE Inflation Data

US Fed Announces Interest Rate Cut, Market Reacts

In a significant move, Federal Reserve Chair Jerome Powell announced on Thursday that the US central bank plans to begin cutting interest rates starting from next month. This decision was made in response to growing concerns about persistent inflation and a slowing global economy.

The announcement came as the US inflation report for July is due later in the day, potentially showing a 2.9% year-over-year increase in core personal consumption expenditures prices. This figure, if confirmed, would mark a significant increase from the previous month's 2.3% rise.

Despite these concerns, recent strong U.S. economic data has soothed recession jitters. The U.S. second quarter real GDP shot up by 3.3 percent compared to the previously reported 3.0 percent surge. This growth, while impressive, has fueled concerns about inflation.

The announcement and the upcoming inflation report have had a noticeable impact on the US stock market. U.S. stocks rose overnight due to earnings news from AI darling Nvidia and a surprise upward revision to the second quarter gross domestic product estimate. The S&P 500 added 0.3 percent to reach another new record closing high, with the tech-heavy Nasdaq Composite gaining half a percent. The Dow edged up 0.2 percent.

The S&P/NX-50 Index's increase extends gains from the previous session, indicating a positive market trend. However, the Fed rate cut hopes have also boosted the price of gold, with the precious metal poised for a monthly gain due to a softer dollar.

Elsewhere, Asian stocks ended mixed on Friday. Japan's markets ended slightly lower due to profit taking on the final day of the month, with the Nikkei 225 Index dipping 0.3%. The Japanese Topix Index settled 0.5% lower, with automakers leading losses. Hong Kong's Hang Seng Index edged up ahead of earnings reports from several heavyweights.

China's Shanghai Composite Index rose 0.4% on Friday, reflecting a positive sentiment in the Chinese market. Geopolitical factors like the Russian-Ukraine conflict remain a concern, but for now, the focus remains on the US economy and the Fed's interest rate decision.

In other economic news, U.S. jobless claims fell to 229,000 last week, signaling low layoffs. This figure, if sustained, could indicate a robust labour market despite the concerns about inflation and a slowing economy.

Federal Reserve Governor Christopher Waller has also voiced his support for the interest rate cut, stating that he wants to start cutting U.S. interest rates next month. This stance aligns with the Fed Chair's announcement and underscores the central bank's commitment to maintaining economic stability.

New Zealand's S&P/NX-50 Index edged up by 0.2 percent, reflecting a positive market trend in the region. Overall, the global market is reacting cautiously to the Fed's interest rate decision, with investors closely watching the upcoming inflation report and economic indicators for further guidance.

Stock Markets in Asia Exhibit Mixed Trends in Anticipation of U.S. PCE Inflation Data