Japan’s benchmark stock index, the Nikkei 225, achieved a historic milestone, setting a new all-time high for the second consecutive day. This surge to 43,421 points is largely fueled by the anticipation of a US Federal Reserve rate cut following recent US inflation data.
Key Facts
- The Nikkei 225’s rise was preceded by a significant milestone on Tuesday when it surpassed 42,999 points for the first time.
- Simultaneously, the US S&P 500 and Nasdaq Composite indices also reached record highs, driven by the positive inflation report and easing trade tensions.
- Asian stock markets, including Hong Kong’s Hang Seng and South Korea’s KOSPI, posted substantial gains.
Background
Recent US inflation data indicated a lower-than-expected rise of 2.7% in July, bolstering the case for a rate cut by the Federal Reserve. This development comes amid ongoing trade discussions between the US and China, with US President Donald Trump recently extending a pause on tariffs affecting Chinese goods for 90 days.
Market Reactions
Investor sentiment has turned markedly positive following these developments. The anticipation of lowered borrowing costs in the US, which could stimulate the economy by making credit cheaper for businesses and consumers, has invigorated global stock markets. Furthermore, the Fed’s potential rate cut is seen as a response to both political pressures and the actual economic indicators suggesting a slowdown.
Official Reactions
US President Donald Trump has vocally criticized Federal Reserve Chair Jerome Powell for not reducing interest rates sooner, arguing that it has caused ‘incalculable’ economic damage. Following the inflation report, expectations for a rate cut in September have dramatically increased, with predictions reaching a 96.4% likelihood according to the CME Group’s FedWatch tool.
What’s Next
The global financial community is now keenly awaiting the Federal Reserve’s meeting in September, where the decision on interest rates will be crucial for future economic forecasts. Meanwhile, markets are likely to remain sensitive to any new economic data releases and geopolitical developments that could influence Fed decisions.