Asian Stocks Gain as Fed Rate Cut Bets Offset Shutdown Jitters
Asian markets advanced this week as expectations of near-term Fed rate cuts outweighed U.S. government shutdown concerns, boosting equities and gold.
A Strong Week for Asian Equities
Asian stocks wrapped up the week on a firm footing Friday, with investors betting heavily that the U.S. Federal Reserve will soon pivot toward cutting interest rates. The optimism around monetary easing helped ease concerns about the ongoing U.S. government shutdown, which has pushed gold to fresh record highs and weighed on the dollar.
Shutdown Concerns Take a Back Seat
The U.S. government shutdown the 15th since 1981 has disrupted everything from scientific research to financial oversight and delayed the release of critical economic data, including the monthly jobs report.
Despite these setbacks, markets have remained calm. Historically, government shutdowns have had little lasting effect on U.S. economic growth or financial markets, giving investors confidence that Washington will eventually resolve its political deadlock.
Weiheng Chen, global investment strategist at J.P. Morgan Private Bank, noted that investors are patient for now. “Markets are more focused on the Fed’s rate-cutting cycle, trade policies, and corporate earnings. A prolonged shutdown, however, could change that sentiment,” he explained.
Regional Markets Ride Wall Street Momentum
MSCI’s index of Asia-Pacific shares edged up 0.14%, just below the record level reached on Thursday. The index is on track for a more than 2% gain this week and has soared 23% year-to-date. With many Asian markets closed for extended holidays, trading volumes were thin.
Japan’s Nikkei rose 0.75% in early trade, maintaining momentum from last month’s record peak. Investors are closely watching the country’s weekend leadership vote, which could reshape fiscal and monetary policy.
Asian markets mirrored Wall Street’s rally, where all three major U.S. indexes closed at record highs, powered by technology shares and continued enthusiasm for artificial intelligence.
Fed Data Dilemma Amid Shutdown
With official U.S. labor data unavailable due to the shutdown, traders are turning to private and public alternatives. So far, these point to a cooling job market.
Blerina Uruci, chief U.S. economist at T. Rowe Price, cautioned that the lack of government reports complicates matters for policymakers. “The Fed is data-dependent, and the absence of official labor market numbers could fuel volatility, making it harder for investors to position confidently,” she said.
Rate Cut Expectations Pressure the Dollar
Despite the data blackout, markets are nearly unanimous in expecting a 25-basis-point Fed rate cut in October. Traders are also pricing in more than 100 basis points of easing through 2026.
That outlook has weighed heavily on the U.S. dollar. The dollar index is set for a 0.35% weekly loss, its sharpest drop since August. The Japanese yen has been the biggest beneficiary, strengthening 1.5% this week its strongest performance since May and last traded at 147.34 per dollar.
Gold Shines While Oil Stumbles
Gold, the traditional safe-haven asset, hovered near a record $3,857 per ounce on Friday. It is on course for a 2.6% weekly gain its seventh straight week of advances and has surged an impressive 47% so far this year. The metal thrives in low-interest-rate environments, making it a favorite during times of economic uncertainty.
Oil markets, however, told a different story. Prices are on track for their steepest weekly decline since June as investors brace for the possibility that OPEC+ could ramp up output despite ongoing supply concerns.
What This Means Going Forward
For now, Asian markets remain resilient, powered by Fed optimism and Wall Street strength. But the situation could shift quickly. A prolonged U.S. shutdown risks dampening investor confidence, while uncertainties around energy supply and global trade remain in play.
Investors will continue to watch the Fed’s next moves closely. With rate cuts looming and safe-haven demand surging, markets may see both new highs and fresh volatility in the weeks ahead.
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