Stock Rally Extends, Dollar Dips on Rate Cut Talk: Markets Wrap

(Bloomberg) -- Asian stocks advanced as a global equity rally gained fresh vigor on strong economic data that eased concerns about the US economy. Taiwan Semiconductor Manufacturing Co. jumped after a bullish outlook.

The MSCI Asia Pacific Index rose 0.4%, with gains in Hong Kong and mainland China. Equity-index futures for US rose 0.2% after the S&P 500 and Nasdaq 100 set closing highs Thursday. TSMC’s shares rallied as much as 2.7% - set for a record close in Taipei - as the company forecast boosted confidence in artificial-intelligence spending.

The dollar edged lower by 0.1% as Federal Reserve Governor Christopher Waller said policymakers should cut interest rates this month to support a labor market that is showing signs of weakness. Treasuries rose with yields on the 10-year falling for a third day. Cryptocurrencies gained after Congress passed the first federal legislation to regulate stablecoins.

Japanese stocks fell along with 40-year government bond yield ahead of a closely watched election this weekend. The country’s inflation cooled a tad more than expected, while remaining above the Bank of Japan’s target.

The cross-asset moves were a sign of bullish risk appetite a day after speculation President Donald Trump would fire Jerome Powell sent volatility spiking. The gains in equities reflected strong economic data and confidence US companies will deliver robust second-quarter earnings, calming the uncertainty caused by Trump’s tariff war.

“As long as the economy continues to expand and unemployment remains low, then people will continue to spend and the flywheel can keep generating higher profits, which is the engine for higher stock prices,” said Chris Zaccarelli at Northlight Asset Management.

A June advance in US retail sales tempered concerns about weaker consumer spending. Applications for US unemployment benefits declined for a fifth straight week to the lowest since mid-April, showing a resilient job market.

Elsewhere, a White House shift on US chip bans that impacts Nvidia Corp. and Advanced Micro Devices Inc. has spurred talk of a grand tech bargain between Washington and Beijing. 

Fed Bank of San Francisco President Mary Daly said it’s reasonable for policymakers to plan on two rate cuts this year, emphasizing that the central bank should not wait too long before moving. Fed Governor Adriana Kugler said officials should keep holding rates steady “for some time,” citing accelerating inflation as tariffs start to boost prices.

The dollar edged lower against most Group-of-10 peers after Waller’s comments on rate cut.

“The dollar remains vulnerable to the downside if concerns about US policymaking further undermine investor confidence in dollar assets,” said Carol Kong, a strategist at Commonwealth Bank of Australia in Sydney.

Meanwhile, Powell remains under pressure with Representative Anna Paulina Luna saying she is “criminally referring” the Fed chair to the Justice Department to investigate “perjury.”  Such referrals by lawmakers are not legally binding. 

Powell countered criticisms leveled at the central bank by a top White House official over a $2.5 billion renovation project in a letter saying “we take seriously the responsibility to be good stewards of public resources.”

Corporate Highlights:

• Netflix Inc. reported second-quarter results that exceeded investor expectations in every major metric. The company also raised its forecast for full-year sales and profit margins.
• Battery material makers’ stocks climbed as the US set to impose preliminary anti-dumping duties of 93.5% on graphite imports from China.
• Disco Corp. shares fell after the Japanese chip gear maker announced weaker-than-expected 2Q shipment guidance.

Some of the main moves in markets:

Stocks

• S&P 500 futures rose 0.1% as of 1 p.m. Tokyo time
• Japan’s Topix fell 0.1%
• Australia’s S&P/ASX 200 rose 1.3%
• Hong Kong’s Hang Seng rose 0.7%
• The Shanghai Composite rose 0.3%
• Euro Stoxx 50 futures rose 0.3%

Currencies

• The Bloomberg Dollar Spot Index was little changed
• The euro rose 0.2% to $1.1624
• The Japanese yen was little changed at 148.66 per dollar
• The offshore yuan was little changed at 7.1847 per dollar

Cryptocurrencies

• Bitcoin rose 0.7% to $120,312.65
• Ether rose 5.1% to $3,596.98

Bonds

• The yield on 10-year Treasuries declined two basis points to 4.43%
• Japan’s 10-year yield was little changed at 1.545%
• Australia’s 10-year yield was little changed at 4.34%

Commodities

• West Texas Intermediate crude was little changed
• Spot gold fell 0.1% to $3,334.69 an ounce

This story was produced with the assistance of Bloomberg Automation.

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