Asian markets took a pause on Thursday as investors adjusted their positions ahead of month- and quarter-end flows. This shift in focus saw the Japanese yen test new lows against the euro and the surging Swiss franc.
In the commodity markets, oil prices experienced a slight downturn following a substantial increase of over 2% the previous day, reaching seven-week highs. This spike was driven by unexpected declines in U.S. crude inventories which raised concerns about supply amid ongoing export challenges in Iraq, Venezuela, and Russia.
In the U.S., futures for both the S&P 500 and Nasdaq saw modest gains of 0.1% as the market awaited remarks from several Federal Reserve officials, whose insights on interest rate policies are anticipated with interest. San Francisco Fed President Mary Daly indicated that further rate cuts may be necessary but clarified that the timing remains uncertain. This follows cautious sentiments expressed by Fed Chair Jerome Powell regarding additional rate cuts after last week’s easing.
The MSCI index tracking shares across Asia-Pacific, excluding Japan, dipped 0.2%, although it had seen a healthy rally of 5.5% for the month and 9% for the quarter. Meanwhile, Japan’s Nikkei index inched up 0.1%, balancing out its 7% monthly gain and 13% quarterly increase. Chinese blue chips remained unchanged, while Hong Kong’s Hang Seng index decreased by 0.2%.
Analysts suggest that funds may create selling pressure in U.S. and Japanese markets due to monthly or quarterly rebalancing mandates, predicting that the German and Australian markets might benefit from increased buying.
Overnight in the U.S., Wall Street experienced a decline for the second consecutive session, as investors took profits from record-high stock levels. Despite this, futures indicate a 92% likelihood of a rate cut from the Fed in October, though expectations of total easing have decreased from 125 basis points to 100 basis points in recent weeks.
Looking ahead, U.S. economic indicators are set to take center stage, including the Personal Consumption Expenditures report—an important measure of inflation—and the final second-quarter GDP estimate, both due on Friday. Meanwhile, concerns regarding a potential government shutdown linger.
In the Treasuries market, there was volatility as investors processed a significant influx of corporate and government bond issuances. The yield on the benchmark U.S. 10-year Treasury note remained stable at 4.1408%, after a 3-basis-point increase overnight, reversing a decline seen earlier in the week. On Thursday, the Treasury Department plans to auction $44 billion in seven-year notes, building on prior auctions for five-year and two-year notes.
In foreign exchange markets, the dollar edged down by 0.1% to 148.77 yen after a previous 0.9% gain. The yen experienced significant loss, falling to an over one-year low against the euro at 174.78 and hitting an all-time low against the Swiss franc at 187.30 yen. The Swiss National Bank is expected to maintain its policy rate at zero later in the day, marking its first pause since late 2023.
In commodity trading, spot gold remained flat at $3,739 an ounce, following a 0.7% decrease overnight due to dollar strength. U.S. crude prices dipped by 0.4% to $64.73 per barrel, while Brent crude fell by 0.3% to $69.11. Analysts highlight that Brent futures continue to find support in the $65-$70 range, despite projections of significant oversupply in the latter part of 2025 and the beginning of 2026. A slight upside risk exists for further declines in Brent prices, with forecasts suggesting they may drop to $60 per barrel in the upcoming quarter.
