The final pieces of the puzzle have fallen into place, and the verdict is in: the Federal Reserve is going to cut interest rates. That growing certainty has unleashed a powerful and unified wave of optimism across the globe, sending Wall Street to new all-time highs and fueling a potent rally across Asian markets on Friday.
The bullish momentum is broad and undeniable. MSCI’s regional stock gauge is surging toward a new record high, with equity benchmarks in Australia, Japan, South Korea, and China all advancing.
The rally is being led by the region’s technology giants, with chipmakers like SK Hynix Inc., Samsung Electronics Co., and Taiwan Semiconductor Manufacturing Co. all climbing. This follows a stunning session in the US, where the S&P 500, the tech-heavy Nasdaq 100, and the MSCI index of global stocks all set new records.
A perfect storm of data seals the deal
This global “risk-on” mood is the direct result of a one-two punch of US economic data that has all but guaranteed a Fed rate cut at its meeting next week.
First, the consumer price index for August came in exactly in line with economists’ forecasts, showing that while inflation is not collapsing, it is not accelerating either.
This was immediately followed by a more dramatic signal from the labor market, with weekly jobless claims surging to their highest level in almost four years.
The combination of manageable inflation and a clearly softening jobs picture has emboldened traders, who now see a September rate cut as a near-certainty.
“Asian equities hardly needed more excuses to rally,” said Chris Weston, head of research at Pepperstone Group Ltd. in Melbourne.
For now, Chinese equities are powering higher, and few things are as emotive as a raging bull trend.
A dovish verdict from the experts
This view is now the firm consensus among market strategists. The debate is no longer about if the Fed will cut, but by how much, and how many more will follow.
“Right now, inflation is a key subplot, but the labor market is still the main story,” said Ellen Zentner at Morgan Stanley Wealth Management.
She argued that Thursday’s CPI print “wasn’t hot enough to distract the Fed from the softening jobs picture. That translates into a rate cut next week — and, likely, more to come.”
Megan Horneman at Verdence Capital Advisors agreed, suggesting the biggest question for investors now is the pace of future easing. While she cautioned the Fed may deliver a “hawkish cut” by reminding investors of its dual mandate, the path forward seems clear.
A bullish wave hits Dalal Street
This powerful global tailwind is set to provide a strong lift for the Indian market. The Sensex and Nifty 50 are expected to open higher on Friday, tracking the upbeat global cues.
The trends on the Gift Nifty indicated a positive start, with the index trading around the 25,183 level, a premium of nearly 80 points. This comes after a solid session on Thursday that saw the Nifty 50 close above the crucial 25,000 level, setting the stage for a powerful end to the week.
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