Asian stocks climb on US rate-cut hopes, Tokyo hits record high

Asian stocks advanced on Tuesday, buoyed by growing expectations that the US Federal Reserve will begin cutting interest rates this year, with Tokyo leading the rally by hitting an all-time high. Gold also surged to a fresh record.

A sharp slowdown in US jobs growth last month raised concerns about the health of the world’s largest economy but fuelled bets that the Fed will ease monetary policy, despite inflation staying above its target. Traders now anticipate as many as three quarter-point cuts before year-end, Bloomberg reported.

Confidence was lifted further after Fed Chair Jerome Powell signaled a dovish shift during his Jackson Hole address last month.

Following Wall Street’s strong performance overnight, Asia opened higher. Hong Kong gained more than one percent, while Shanghai, Seoul, Taipei and Manila also advanced. Sydney, Singapore and Wellington, however, dipped.

Indonesia saw the sharpest losses, with both equities and the rupiah dropping over one percent after President Prabowo Subianto dismissed Finance Minister Sri Mulyani Indrawati in a surprise reshuffle amid deadly protests.

Gold prices soared past $3,650, marking a new peak.

Still, analysts urged caution. “Markets have embraced the ‘bad news is good news’ narrative, assuming weaker data will accelerate Fed cuts,” said Fabien Yip of IG Markets. “But concerns remain that easing alone may not be enough to counter labour market weakness.”

Tokyo’s surge came despite political uncertainty, as investors bet Japan’s next prime minister—following Shigeru Ishiba’s departure—will roll out fresh stimulus. “The LDP leadership race will be critical in shaping fiscal and monetary policy, with major implications for Japanese stocks and the yen,” noted Hani Abuagla of XTB MENA.

Investors are also monitoring rising Japanese government bond yields, as well as key developments in Europe. The European Central Bank is set to decide policy this week, while France faces fresh political turbulence after Prime Minister Francois Bayrou lost a confidence vote, forcing President Emmanuel Macron to find a successor.

Key figures at around 0230 GMT 

Tokyo - Nikkei 225: UP 0.2 percent at 43,732.80 (break)
Hong Kong - Hang Seng Index: UP 1.2 percent at 25,941.87
Shanghai - Composite: UP 0.1 percent at 3,830.42
Euro/dollar: UP at $1.1776 from $1.1760 on Monday
Pound/dollar: UP at $1.3570 from $1.3549
Dollar/yen: DOWN at 147.24 from 147.43 yen
Euro/pound: DOWN at 86.78 pence from 86.80 pence
West Texas Intermediate: UP 0.4 percent at $62.51 per barrel
Brent North Sea Crude: UP 0.4 percent at $66.31 per barrel
New York - Dow: UP 0.2 percent at 45,514.95 (close)
London - FTSE 100: UP 0.1 percent at 9,221.44 (close)