SINGAPORE- Asian shares gained on Thursday on rising expectations the US Federal Reserve will likely cut interest rates in September, while the euro firmed ahead of the European Central Bank policy meeting where a rate cut is widely expected.
The shifting Fed expectations lifted oil prices and dragged Treasury yields to their lowest in two months, putting the dollar under pressure, after data this week hinted the US labor market was easing.
MSCI’s broadest index of Asia-Pacific shares outside Japan rose 1.28 percent . The index was on course for a 2.8 percent gain in the week and is set to snap its two-week losing streak.
The exuberance in markets looked set to continue in Europe, futures indicated. Eurostoxx 50 futures was 0.46 percent firmer and FTSE futures rose 0.27 percent ahead of the ECB policy meeting later in the day.
Meanwhile, the tech-heavy Taiwan stock index surged more than 2 percent to touch a record high.
Indian stocks also rose as investors moved past shock election results that reduced the ruling party’s margin of majority and unnerved markets about the path of economic policies in a turbulent week for Indian assets.
The ECB meeting will kick off a fresh round of central bank policy reviews, with the Fed and the Bank of Japan due to meet next week and after Bank of Canada cut rates on Wednesday, the first G7 country to do so, in a widely expected move.
The ECB is all but certain to cut interest rates from record highs on Thursday but investor focus will be on comments and economic projections to gauge what comes after the expected rate cut. Markets are pricing in 64 basis points of cuts this year.
“An ECB cut will definitely add to the bullish narrative … any cut will be need to be paired with dovish guidance to raise hopes of further easing,” said Kyle Rodda, senior financial market analyst at Capital.com.
“It’s probably a risky policy but the central bank has painted itself in the corner with its forward guidance.”
The euro was up 0.17 percent at $1.08875, not far from the two-and-a-half month high it touched on Tuesday, while the yen was last at 155.845 per dollar, inching away from the more than two-week high of 154.55 touched on Tuesday.
