Asian markets moved higher as expectations for US interest rates became more supportive, giving equities a clearer near-term tailwind despite continued pressure from higher oil prices.
Weaker US employment data has reduced concern that the Federal Reserve will need to tighten policy further in the immediate term. That shift has improved market sentiment across parts of Asia, with Japan and Hong Kong among the stronger performers as traders adjusted to a potentially more favourable interest-rate backdrop.
Japan’s Nikkei 225 rose by around 2%, helped by a weaker yen, while Hong Kong’s Hang Seng gained more than 1%. The broader move reflects growing confidence that lower US rate expectations could support equity valuations and improve the relative appeal of risk assets.
The change in interest-rate expectations is important because US monetary policy has a direct influence on global capital flows. When markets see less risk of higher borrowing costs, pressure on equity valuations can ease and investors may be more willing to increase exposure to growth assets.
Chinese equities were more subdued, with blue-chip shares moving lower after July inflation data pointed to continued weakness in domestic demand. Even so, the wider regional picture remained constructive as monetary policy expectations provided support across major Asian markets.
Attention now turns to US inflation data due on Wednesday. Markets expect only modest monthly increases in headline and core consumer prices. A reading close to expectations would strengthen the case for a more stable interest-rate environment and could reinforce the positive positioning already visible across global equities.
Interest-rate markets have already adjusted significantly. The implied probability of a Federal Reserve move in September has fallen to around 45%, down from 67% a week earlier. That repricing has supported bonds and helped create a more favourable backdrop for equities.
Corporate earnings are also strengthening the market case. With almost 90% of S&P 500 companies having reported, earnings growth has remained solid and around 76% of companies have beaten expectations. Businesses with significant exposure to artificial intelligence have delivered particularly strong earnings growth, keeping technology investment and infrastructure spending firmly in focus.
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