Global stocks extend rally as US inflation fuels rate-cut bets

Global stock markets extended their rally on August 13, with Japan’s benchmark index following Wall Street to record highs, after steady US inflation data prompted traders to raise bets that the Federal Reserve would cut interest rates next month.

Japan’s benchmark Topix closed up 0.8 per cent at an all-time high, while Taiwan’s Taiex finished just shy of a new peak and South Korea’s Kospi strengthened 1.1 per cent. In Europe, the Stoxx Europe 600 rose 0.4 per cent and the FTSE 100 gained 0.3 per cent in early trading, Financial Times reports. 

The gains came after figures released on August 12 showed US inflation remained unchanged at 2.7 per cent in July, defying expectations that President Donald Trump’s sweeping tariffs would push prices higher.

Investors said the unexpectedly benign reading removed the last remaining obstacle to a Fed rate cut at its September meeting, with futures markets pricing in a 96 per cent chance of a quarter-point reduction.

Stocks have staged a recovery from the turmoil that shook markets in early April, when Trump launched his trade war, as fears of immediate global economic damage have eased. Investor sentiment was further boosted by the extension of a US-China trade truce on August 12.

In the US, the S&P 500 index closed up 1.1 per cent and the Nasdaq Composite finished 1.4 per cent higher on August 12, driven largely by Big Tech stocks.

“The wave of money that’s coming into the market just dwarfs all negative sentiment, especially for the AI boom,” said Wee Khoon Chong, a senior strategist at BNY. “Obviously tariffs matter, but the influx of money matters even more when it’s such a large scale.”

Since its post-“liberation day” low on April 8, the S&P 500 has rallied 29 per cent. In Asia, Taiwan’s Taiex and South Korea’s Kospi are both up 40 per cent, while Japan’s Topix has advanced 35 per cent over the same period.

The gains on August 13 in Asia were partly driven by expectations of continued strong US demand for semiconductor exports from the region, according to Jason Lui, head of Asia-Pacific equity and derivative strategy at BNP Paribas. Chipmaker SK Hynix rose 3.4 per cent, Sony Group gained 3.5 per cent, Japan’s Maruwa—which produces ceramics for circuit boards and semiconductors—added 3 per cent, and Taiwan Semiconductor Manufacturing Company climbed 1.7 per cent to a fresh all-time high.

“Because the US has been so resilient it may have alleviated some concerns” for chip demand, Lui said.

In China, the benchmark CSI 300 index added 0.8 per cent, while Hong Kong’s Hang Seng index surged 2.3 per cent. Chinese equities were also supported by a new consumer loan interest program and subsidies for loans to businesses in the consumption sector.

Asian markets stand to benefit from a weaker dollar and lower US rates. The dollar fell 0.4 per cent against a basket of its peers on August 12 and slipped a further 0.2 per cent on August 13.

By Sabina Mammadli