ASIAN, EUROPEAN MARKETS RISE

Traders mull over outlook for US interest rates as Fed officials question the need for a cut anytime soon

STOCK markets in Asia and Europe rose yesterday with traders mulling the outlook for United States interest rates as Federal Reserve (Fed) officials questioned the need for a cut anytime soon.

Oil extended the previous day’s losses, fuelled by data indicating softer demand in the US and fading fears of a regional war in the Middle East.

Investors brushed off a sell-off on Wall Street where tech firms were hit by worries that borrowing costs will be kept elevated longer than expected.

Comments from Fed officials reinforced the view that sticky inflation and a resilient US economy will keep the bank from easing monetary policy anytime soon.

A rally across global markets, which saw some hit record highs this month, has given way to concerns that valuations may be overdone, and analysts said the current earnings season was key to maintaining momentum.

Expectations for rate cuts in 2024 have fallen from six predicted at the start of the year to just two, while some analysts have even warned of a possible hike.

Cleveland Fed chief Loretta Mester said on Wednesday she thought borrowing costs were at the right level for now and there was no rush to reduce them just yet.

And while she saw inflation coming down, she said: “I do think that we need to be watching and gathering more information before we take an action.”

Meanwhile, governor Michelle Bowman added that she thought “time will tell whether it is sufficiently restrictive”.

The remarks came a day after Fed boss Jerome Powell indicated borrowing costs could stay higher for longer following three straight months of aboveforecast inflation and jobs creation.

“The US central bank remains on track to cut rates twice this year, most likely starting at its September meeting,” said Solita Marcelli at UBS Group AG.

Hong Kong, Tokyo, Shanghai, Sydney, Seoul, Singapore, Taipei, Mumbai, Manila, Bangkok and Jakarta all rose.

London, Frankfurt and Paris were all higher in early exchanges.

Oil dropped further after losing more than three per cent on Wednesday on figures showing a forecast-busting build in US stockpiles that raised questions about demand in the world’s top economy.

Relief that Israel had held off any retaliation for the weekend’s missile attack by Iran — soothing fears of a conflict between the Middle East foes — also weighed on prices.

Foreign exchange markets are also being closely followed after the US dollar pushed uncomfortably higher against its peers.

Particularly in focus are the yen and won after US Treasury Secretary Janet Yellen joined her

Japanese and South Korean counterparts in saying they were keeping an eye on movements.

The statement came after South Korea’s Choi Sang-mok and Japan’s Shunichi Suzuki shared “serious concerns” on the recent weakness of their currencies and agreed to take “appropriate actions” to counter extreme volatility.

Analysts said the statement with Yellen suggested Washington would not push back against intervention by the countries.

The yen has lost almost nine per cent this year and the won about seven per cent.

However, Yujiro Goto, at Nomura Securities, warned that such a move would not alter the trend in the market if fundamentals do not change.