Global Stocks Climb as Expectations of Rate Cuts Grow, Trump Tightens the Grip on Fed

Asian stock markets climbed on the opening of the new week with the hope of U.S. interest rate cuts giving investors some relief. MSCI’s broad Asia-Pacific index (excluding Japan) climbed by 0.8%, rose by 0.6%, and South Korea’s KOSPI. However, Japan’s Nikkei index declined by 1.6% after a sharp rise in the yen’s value. Chinese blue chips stayed flat and showed a little change.

In Europe, the market’s future looked optimistic. EUROSTOXX 50 futures climbed by 0.6% while FTSE futures gained 0.5% and DAX futures rose by 0.4%. U.S. stock futures also jumped-S&P futures and Nasdaq futures both moved up by 0.4%.

Weak U.S. Job Data Hints at Rate Cuts

Friday’s weak job data has raised the chances that the Federal Reserve will cut interest rates soon. The July job report shows that the job growth declined sharply, with earlier months revised lower. Three-month average job growth declined sharply from 231,000 earlier this year to 35,000 at present.

As a result, markets expect an 85% chance of the Fed reducing rates by 25 basis points in September. Two-year U.S. Treasury yields dropped by 25 basis points on Friday, which is the biggest single-day fall since August last year.

Political Pressure Raises Concerns About Fed Independence

President Donald Trump’s consistent pressure on Fed Chair Jerome Powell and firing of U.S. Labor Statistics Chief have raised alarms of political interference in the Federal Reserve. Analysts are concerned that the new appointee may side with Trump on calls for rate cuts. Though Trump has indicated that Powell will complete his term, many now question the Federal Reserve’s autonomy.

Dollar Slides, Commodity Mixed:

The weak job data also affected the dollar index, which fell to 98.72 from last week’s 100.25. The greenback slipped 2.3% against the yen on Friday, marking its biggest decline in recent months. It now trades at 147.69. The Euro remained steady at $1.1683 and the British Pound at $1.3282 ahead of the Bank of England’s rate decision, which is expected this week.

Gold was steady at $3,361 an ounce after gaining more than 2% on Friday, the previous week. Brent crude dropped 0.2% to $69.51 a barrel, while U.S. crude edged down 0.1% to $67.24.