Asian stock markets surge together on hopes for US rate cuts

Besant, US Treasury: "Focus on whether there will be a 0.5% rate cut in September" pressure rises

Boosted by expectations of an interest rate cut, US stocks hit record highs, propelling Asian stock markets to soar collectively on the 13th (local time).

Japan's Nikkei 225 extended its record-setting streak from the previous day, rising a further 1.3% to close at a historic 43,274.67. This marked a six-day consecutive rally driven by shipbuilding and AI-related stocks.

Despite news of delisting at the major property developer Evergrande, Hong Kong's Hang Seng Index jumped 2.58% thanks to tech company earnings, while the Shanghai Composite Index also gained 0.48%. South Korea's KOSPI rose by 1.08%, and Taiwan's TAIEX climbed 0.88%.

The MSCI Asia Pacific Index rose 1.4%, reaching its highest level since February 2021.

European stocks also posted general gains, with the STOXX 600 Index up 0.4% as of 10 AM London time.

After recording record highs the previous day, US stock index futures continued their modest uptrend. S&P 500 futures edged up 0.1%, NASDAQ 100 futures rose 0.2%, and Dow Jones Industrial Average futures gained 0.1% respectively.

Driven by expectations of rate cuts, US Treasury bond prices generally increased. The 10-year Treasury yield dropped 3.5 basis points (1bp=0.01%) to 4.258%. The 2-year yield came in at 3.712%, down 1.9bp.

Among July US CPI figures released the previous day, the core Consumer Price Index (CPI)—closely watched by the Federal Reserve System—came in above estimates at 3.1%, mainly due to higher service prices. The headline CPI was reported at an annualized 2.7%, less affected by tariff-related inflation than economists had forecast, fueling optimism in the market.

Amid a significantly cooled labor market and less severe inflationary pressure than anticipated, expectations for a September rate cut grew even further.

According to CME Group's FedWatch Tool, the probability of a September rate cut was in the 80% range before the CPI release, but has now jumped to 96%.

Further fueling the rally, Treasury Secretary Besant said in a Fox News interview the previous day, "What matters now is whether there will be a 0.5 percentage point rate cut in September." This is being interpreted as both strong pressure on the Federal Reserve System and a signal that the growing number of Trump-affiliated officials participating in the September policy meeting may influence the FOMC.

Michael Brown, Chief Research Strategist at Pepperstone, commented, "The strong bull market remains plausible as concerns about a weakening US economy are offset by expectations for dovish policy."

Junga Kim, Contributor kja@hankyung.com