Asian markets rallied on Monday, driven by renewed optimism that central banks might soon lower interest rates. This positive sentiment followed Friday’s key US inflation report, which showed headline figures meeting expectations. Notably, real spending dropped by 0.1%, and the core Personal Consumption Expenditures (PCE) index rose by just 0.2% month-on-month—its slowest pace since November. While it’s premature to declare the Federal Reserve’s battle against inflation over, these figures were enough to enhance risk appetite and weaken the US dollar.
In the Asia-Pacific region, index futures were predominantly higher. The Hang Seng, Nikkei, TOPIX, and KOSPI all surged over 1% on Monday. Investor sentiment was further buoyed by expectations that the European Central Bank (ECB) will cut rates for the first time in eight years this week. Additionally, there is speculation that the Bank of Canada (BOC) might also consider a rate cut, further enhancing market optimism.
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