Global Markets Surge as Central Banks Signal Further Rate Cuts

Global stocks improved in Asia as central banks signaled upcoming rate cuts and key U.S. inflation figures suggested more easing. China's central bank reduced its 14-day repo rate, while holiday-thinned trading in Japan showed positive movements in Asia-Pacific shares. Numerous U.S. exchanges saw a busy session, and analysts forecast additional Fed rate cuts.

Global stocks exhibited robustness in Asia on Monday in anticipation of central bank meetings expected to bring about two more rate cuts, alongside crucial U.S. inflation figures suggesting additional economic easing. China's central bank notably lowered its 14-day repo rate by 10 basis points, mere days after eschewing cuts to longer-term rates.

Despite analysts cautioning that this move was merely aligning with a previously executed 7-day repo rate cut, market reactions were positive, leading to a 0.3% increase in stocks. A holiday in Japan resulted in reduced trading activity, while MSCI's broadest index of Asia-Pacific shares outside Japan saw a 0.3% rise after a vigorous 2.7% rebound last week. Singapore's main index reached its highest point since late 2007. Meanwhile, although Tokyo's Nikkei was closed, futures were trading at 38,510, up from a cash close of 37,723, following last week's 3.1% rally driven by easing yen and the Bank of Japan's signal to maintain its current policy stance.

EUROSTOXX 50 futures gained 0.5%, FTSE futures 0.3%, and DAX futures 0.4%. S&P 500 futures firmed 0.3%, and Nasdaq futures rose 0.6%. The S&P has increased by 1% so far in September and 19% year-to-date, reaching new record highs. U.S. exchanges experienced their busiest session since January 2021 on Friday, trading over 20 billion shares. Analysts from Bank of America highlighted that historically, the S&P rises an average of 21% in 12 months following the initial Fed cuts absent a recession.

(With inputs from agencies.)