Asian shares, gold supported by rate cut hopes

By Wayne Cole

SYDNEY (Reuters) – Asian shares were quiet on Monday after global shares enjoyed their best week in nine months on expectations that the U.S. economy will avoid a recession and falling inflation will trigger a cycle of interest rate reductions.

The prospect of lower borrowing costs pushed gold out of $2,500 an ounce for the first time and the dollar fell against the euro, although both the safe-haven yen and the Swiss franc retreated as risk appetite and he came back

Federal Reserve members Mary Daly and Austan Goolsbee were out over the weekend to signal the possibility of easing in September, while minutes from the latest policy meeting, due this week, should highlight the dovish outlook.

Fed Chairman Jerome Powell speaks in Jackson Hole on Friday, and investors assume he will concede the case for a cut.

“While it may be too soon to declare victory – and central bankers will surely be careful to avoid this in their official rhetoric – the inflation scare that has dominated the policy debate since prices began to rise during the pandemic has now disappeared in a great deal,” he said. Barclays economist Christian Keller.

“Inflation may not be at the 2% target yet, but it’s close and moving in the right direction.”

Futures are fully priced for a quarter-point move and imply a 25% chance of 50 basis points, much depending on what the next payroll report shows.

Analysts at Goldman Sachs warned that annual revisions to the jobs series are due on Wednesday, which could see a major downward revision of between 600,000 and one million positions, although that would likely overstate the weakness in the labor market.

For now, expectations of a softer-than-soft landing for the US economy have S&P 500 futures up 0.2% and Nasdaq futures up 0.3%, on top of last week’s gains.(.N)

MSCI’s broadest index of Asia-Pacific shares outside Japan rose 0.2 percent, after rising 2.8 percent last week.

Japan’s Nikkei fell 0.4 percent but followed a nearly 9 percent gain last week.

The Fed is not alone in considering looser policy, with Sweden’s central bank expected to cut interest rates this week, possibly by as much as 50 basis points.

In currency markets, the euro was steady at $1.1025, just below last week’s high of $1.1047. The dollar stood at 147.79, reaching 149.40 last week. (USD/)

“The Fed’s overall message this week will likely reassure market participants looking for confirmation that policy rate cuts are now imminent,” said Jonas Goltermann, deputy chief markets economist at Capital Economics.

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“As such, the greenback could remain under pressure in the near term, although given the extent to which the Fed’s easing is already being reduced, we doubt further dollar weakness is in the offing.”

A softer dollar combined with lower bond yields to help gold hold at $2,506 an ounce and near an all-time high of $2,509.69. (EMPTY/)

Oil prices fell again as concerns over Chinese demand continued to weigh on sentiment. (OR)

Brent fell 29 cents to $79.39 a barrel, while U.S. crude lost 27 cents to $76.38 a barrel.

(Reporting by Wayne Cole; Editing by Christopher Cushing)