Key points

• Nikkei firms toward March top, S&P 500 futures steady.
• Markets, sterling calm as the UK heads to polls.
• Odds narrow on a September Fed cut after soft data.

Asia stocks soared to a 27-month high on Thursday, driven by softer U.S. economic data that increased the likelihood of a September rate cut. This development boosted bonds and commodities while dragging down the dollar.

A holiday in the United States led to thin trading as investors awaited the outcome of the UK election, where the Labour Party is expected to secure a substantial majority. 

Markets brace for Labour victory in UK, National Rally struggles in France

Markets have been bracing for this change, with opinion polls predicting a landslide victory for the centre-left party over the Conservatives. The Labour Party’s plans include modest tax and spending measures aimed at reducing the UK’s budget deficit and moving the UK closer to EU alignment.

In France, polls indicated that the National Rally (RN) would not win a majority in Sunday’s election, as mainstream parties work to block the far-right.

You might be interested: Election years could be profitable for political traders

Global markets show resilience with FTSE and EUROSTOXX stability

FTSE futures nudged up 0.1%, and sterling firmed to $1.2750. EUROSTOXX 50 futures remained stable. The MSCI’s broadest index of Asia-Pacific shares outside Japan added 0.7%, reaching its highest point since April 2022.

Japan’s Nikkei rose 0.4%, nearing its March peak, while the broader Topix clinched all-time highs.

S&P 500 and Nasdaq futures steady

Picture: Further upside for S&P 500 as speculated on the VT Markets app.

S&P 500 futures and Nasdaq futures held steady after hitting new records overnight, following soft economic data from the U.S. The ISM measure of services activity slid to its lowest level since mid-2020, with weak employment figures ahead of the June payrolls report due on Friday. While the series was contradicted by strength in the PMI survey of services, both surveys indicated easing inflation.

Yields on 10-year Treasuries dropped 8 basis points to 4.355%. With the U.S. economy appearing less exceptional, the dollar declined across the board. The euro rose to $1.0793, up from its recent low of $1.0666, while the dollar index hit a three-week low.

Aussie hits six-month high on rate hike speculation

Picture: Aussie on the rise, trading at 0.67152 as seen on the VT Markets app.

The Australian dollar gained, touching a six-month peak of $0.6733 as markets wager the next move in local rates could be higher. The yen remained weak, hitting multi-year lows against several currencies as investors favored carry trades. The dollar stood at 161.40 yen after reaching a 38-year high of 161.96 overnight.

The drop in the dollar benefited commodities, with gold rallying to $2,358 an ounce from $2,318 at the start of the week. Oil prices eased slightly after a large decline in U.S. crude stocks suggested firmer demand as the U.S. driving season begins. Brent dipped 31 cents to $87.03 a barrel, and U.S. crude fell 33 cents to $83.55 per barrel.

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