SYDNEY, Australia — Asian shares moved higher on Monday, August 17, as Chinese stocks led regional gains while the U.S. dollar weakened toward a two-month low. Investors were reassessing the chances of an imminent Federal Reserve rate hike after softer U.S. economic data reduced expectations for tighter monetary policy.
- Asian markets: MSCI’s Asia-Pacific index outside Japan gained 0.5%, while Japan’s Nikkei rose 0.3%.
- China: The CSI300 advanced 0.8% and Hong Kong’s Hang Seng Index climbed 1.6% ahead of July activity data.
- Fed outlook: Markets now price a 30% chance of a rate hike next month, down from about 50% a week earlier.
- Oil prices: Brent crude edged up 0.2% to $88.67 a barrel after gaining 6% last week.
Asian Shares Gain as China Leads Regional Markets
Chinese equities provided much of the momentum in Asian trading. Blue-chip stocks rose 0.8%, while Hong Kong’s Hang Seng Index gained 1.6% ahead of China’s July economic activity figures.
Economists expect industrial output growth to slow to 4.8% from 5.3% previously. However, investors are also watching for a possible upside surprise after strong exports were supported by robust global demand linked to artificial intelligence.
Japan’s Nikkei added 0.3%. South Korean markets were closed for a public holiday, leaving regional trading without one of Asia’s major equity markets.
Fed Rate Hike Expectations Fall Sharply
The biggest driver for global markets was the changing outlook for U.S. interest rates. According to CME Group’s FedWatch tool, financial markets were pricing a 30% probability of a Federal Reserve rate hike next month, compared with roughly 50% a week earlier.
The shift followed weaker-than-expected U.S. economic indicators. Retail sales recorded their first decline in nine months in July, while consumer sentiment also deteriorated more than expected. Softer inflation readings have added to the case for a less aggressive monetary-policy outlook.
U.S. stock futures reflected the improved risk appetite. S&P 500 futures rose 0.1%, while Nasdaq futures gained 0.3%. European markets were also positioned for a stronger opening, with EUROSTOXX 50 futures up 0.3%.
Dollar Slides Against Major Currencies
The softer expectations for Federal Reserve policy weighed on the U.S. dollar. The euro climbed to a two-month high of $1.1588, while the Australian and New Zealand dollars reached 10-week peaks of $0.7105 and $0.5910 respectively.
The currency moves reflect changing expectations around interest-rate differentials as investors reassess the possibility of further U.S. monetary tightening.
Oil Market Watches Middle East Conflict
Oil prices remained sensitive to developments in the Middle East following substantial gains last week. Brent crude rose 0.2% to $88.67 a barrel after climbing 6% over the previous week.
U.S. crude, meanwhile, slipped 0.2% to $82.19 a barrel after gaining 5.4% last week. Tensions surrounding Iran, the Strait of Hormuz and the wider Gulf conflict continued to keep energy markets on alert.
Iran called on the United States to accept defeat on Saturday, while U.S. President Donald Trump urged Americans to accept higher gasoline prices while the conflict continues. The Lebanese health ministry also said at least 11 people were killed in Israeli strikes in southern Lebanon on Saturday.
Shane Oliver, chief economist at AMP, said the oil market remained caught between risks of restricted supply and efforts to prevent prices from moving sharply higher. He estimated that Middle East oil flows remained 10% to 15% below normal levels.
U.S. Treasury Yields Edge Lower
U.S. Treasury yields also declined on Monday. The two-year Treasury yield fell two basis points to 4.154%, after declining three basis points last week and reaching a seven-week low of 4.0977%.
The benchmark 10-year yield slipped two basis points to 4.680%, following a four-basis-point increase over the previous week.
Investors Turn to U.S. Data and Retail Earnings
Markets will now focus on incoming U.S. economic indicators and corporate earnings for clues about the strength of consumer demand and the broader economy.
Major retailers including Home Depot, Target and Walmart are scheduled to report earnings this week. Investors will be looking closely at their results for evidence of how U.S. consumers are coping with the current economic environment.
Another important release will be the August S&P Purchasing Managers’ Indices. The figures are expected to provide insight into whether the acceleration in U.S. business activity seen around mid-year can continue.
Gold Extends Recent Gains
Gold prices also moved higher, with the precious metal gaining 0.4% to $4,391 an ounce. Gold had already advanced 0.8% during the previous week as investors continued to monitor monetary-policy expectations and geopolitical risks.
Frequently Asked Questions
Why did Asian shares rise on August 17?
Asian shares gained as Chinese stocks strengthened and investors reduced expectations of an imminent Federal Reserve rate hike following softer U.S. economic data.
What happened to the U.S. dollar?
The U.S. dollar weakened toward a two-month low, while the euro reached $1.1588 and the Australian and New Zealand dollars touched 10-week highs.
What Markets Are Watching Next
Investors are now focused on China’s July activity data, upcoming U.S. retail earnings and the August S&P PMIs. At the same time, developments affecting oil supplies in the Middle East remain a key risk for global markets.
Financial disclaimer: This article is for general news and informational purposes only. It does not constitute financial, investment or trading advice. Market prices and conditions can change rapidly, and readers should conduct their own research or consult a qualified financial professional before making investment decisions.
