Market Watch: Asian Shares Edge Higher Amid Expectations of European Rate Cut – Key Inflation Readings Up Next!

In Sydney, Australia, Asian shares saw a slight increase on Tuesday, while the dollar remained subdued for a third consecutive session. The rise in shares can be attributed to growing expectations of an impending European rate cut, which has boosted risk appetite among investors. However, gains were tempered as investors await key inflation data to be released later in the week.

European markets are expected to open slightly stronger, with EUROSTOXX 50 futures up by 0.2%. This follows overnight gains spurred by comments from several European Central Bank officials suggesting room for interest rate cuts amidst slowing inflation. Market expectations now anticipate two rate cuts by October, driving up Wall Street stock futures ahead of the U.S. market reopening after a public holiday.

Asian-Pacific shares outside Japan also rose by 0.2%, building on a 0.9% increase the previous day. Taiwanese shares reached a record high with a 0.5% climb, while Hong Kong’s Hang Seng index saw a 0.1% increase. In contrast, Japan’s Nikkei slipped by 0.2%, reversing some of its gains from the previous day.

Amidst the market movements, analysts like Tony Sycamore from IG note that the summer season in the northern hemisphere tends to see markets entering a drift mode. Sycamore is optimistic about further gains in the Hang Seng index, supported by data indicating improvements in the Chinese economy. Meanwhile, there are concerns surrounding the Nikkei as it struggles to reach its previous record high from March, with some investors redirecting funds to Chinese markets.

Looking ahead, key risk events are anticipated later in the week, including U.S. data on core personal consumption expenditures and eurozone inflation figures, which will likely impact trading sentiment. The dollar continues to weaken against major peers as traders await the release of U.S. data.

In the foreign exchange market, the Japanese yen remained steady against the dollar, while weakening against high-yielding currencies like the New Zealand dollar. Oil prices continued to climb, with Brent futures rising to $83.23 a barrel and U.S. crude futures for July at $78.84 a barrel.

Gold prices also saw an increase for the third consecutive day, reaching $2,352.20 per ounce. Overall, market movements indicate a cautious yet optimistic outlook as investors navigate through uncertainties in global economic conditions.