Volkswacht Bodensee - Stocks rally into weekend with US rate cut 'seemingly locked in'

The bullishness that has characterised trade for the past few weeks has ramped up since a series of reports indicating the labour market in the world's biggest economy was slowing sharply.

Adding to that has been relief that a feared spike in inflation caused by US President Donald Trump's tariffs has not so far emerged, giving the central bank room to loosen monetary policy.

And that trend continued Thursday with figures showing August consumer prices rose a little more than the previous month but in line with expectations, while jobless claims hit their highest level in four years.

A report last week revealed the economy added just 22,000 jobs in August, while revised data showed job growth was more than 900,000 fewer than previously reported in the year through March.

Analysts said the readings mean the Fed will now put most of its focus on supporting the labour market, rather than bringing inflation down to its two percent level. It currently stands at around three percent.

"Inflation is not getting closer to the Fed's target, but... as labour market concerns grow more pressing, fears (that) price pressures will be persistent fade," said Taylor Nugent, senior economist for markets, at National Australia Bank.

"There is nothing to stand in the way of Fed cuts this year."

With all three main indexes on Wall Street hitting new heights, Asia was more than happy to pick up the baton heading into the weekend.

Hong Kong led the way, rising more than one percent, helped by a surge of more than five percent in market heavyweight Alibaba.

The ecommerce titan's New York stock had spiked eight percent on Thursday, helped by its latest moves in the artificial intelligence sector including raising US$3.2 billion to boost its AI budget.

It also said it would ramp up spending on its core e-commerce business.

Seoul and Tokyo extended their record run this week, while Sydney, Taipei, Mumbai, Bangkok and Jakarta were also in the green. There were some losses in Shanghai, Singapore and Manila.

London edged up even as data showed the UK economy stalled in July, while Paris and Frankfurt were also slightly higher.

Traders are keenly awaiting the Fed's policy meeting next week, with most expecting it to announce a 25-basis-point cut, though there are some rumblings of a 50-point reduction.

The post-gathering statement and comments from boss Jerome Powell will be closely watched for clues about its moves for the rest of the year and heading into 2026.

"The Fed is seemingly locked in and a done deal. While some may see the risk of potential disappointment if the Fed holds back from delivering a 50-basis-point cut, realistically, the prospects of an oversized 50-point move seems a tall order for the voting committee," said Pepperstone's Chris Weston.

"The base case is a 25-basis-point cut backed by a commitment to ease further in the meetings ahead."

- Key figures at around 0715 GMT -

Tokyo - Nikkei 225: UP 0.9 percent at 44,768.12 (close)

Hong Kong - Hang Seng Index: UP 1.2 percent at 26,396.58

Shanghai - Composite: DOWN 0.1 percent at 3,870.60 (close)

London - FTSE 100: UP 0.1 percent at 9,310.06

Euro/dollar: DOWN at $1.1732 from $1.1737 on Thursday

Pound/dollar: DOWN at $1.3553 from $1.3580

Dollar/yen: UP at 147.45 from 147.18 yen

Euro/pound: UP at 86.58 pence from 86.43 pence

West Texas Intermediate: DOWN 1.0 percent at $61.78 per barrel

Brent North Sea Crude: DOWN 0.8 percent at $65.81 per barrel

New York - Dow: UP 1.4 percent at 46,108.00 points (close)

R.Kloeti--VB