Asian markets jump as bets on rate cuts grow

Following Wall Street's overnight gains, Asian equities enjoyed a rise on Thursday as investors increased their wagers that the Federal Reserve will drop interest rates by September due to a plethora of negative economic data.

Recent sessions saw Japanese equities emerge as the best performers, recovering the majority of the losses sustained during the second quarter and approaching all-time highs.

Regional markets followed Wall Street's overnight gains, as the NASDAQ and the S&P 500 reached all-time highs in a trade that was limited by the holiday after PMI readings and dismal labour data increased bets on a 25 basis point drop in September.

However, this confidence was partly dampened by the minutes of the Fed's June meeting, as U.S. stock index futures moved sideways in Asian trading. Sentiment was also cautious due to expectations for Friday's important nonfarm payrolls report.

This week, the Nikkei broke over 40,000 for the first time since April and was almost at record highs established in the first quarter.

Over the last week, Japanese stocks surged as a wave of dismal economic data weighed on the yen and increased speculation that the Bank of Japan would have little room to tighten policy.

For the most part, investors ignored possible obstacles to corporate profits caused by the slowing expansion of the Japanese economy. The government lowered first-quarter GDP numbers earlier this week, revealing a far greater decline in growth than previously thought.

Technology companies drove gains in Japanese markets as well, after a surge in their American counterparts' values due to excitement surrounding artificial intelligence.

Wider Asian markets rose as investors were more confident that the Fed would start lowering interest rates in September. Traders were putting in a nearly 66% possibility of a 25 basis point decrease, according to the CME Fedwatch tool, up from earlier estimates of a 59.5% chance yesterday.

Following data from the private purchasing managers index indicating weaker-than-expected growth in the services sector, sentiment towards China did not appear to be improving.

Uncertainties about the extent of the government's forthcoming supporting measures were also raised by Beijing's pause in stimulus measures.

Now, attention is focused on the Chinese Communist Party's Third Plenum, a gathering of high-ranking officials that should reveal further clues about the country's economy.

(Sources: investing.com, reuters.com)