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## Asian Share Markets Rally on Expectations of Global Rate Cuts

By Wayne Cole

SYDNEY (Reuters) – Asian share markets rallied on Monday as investors looked forward to a rate cut in Europe, and quite possibly Canada, as the next step in global policy easing, though sticky inflation threatens to make the process a drawn-out affair.

There was also better news from China as the private Caixin survey showed a pick-up in its main factory index to a two-year top of 51.7 in May, from 51.4 in April. This positive data from China, alongside Japan’s factory activity expanding for the first time in a year in May, and South Korea’s activity growing at the fastest pace in two years, all contributed to the bullish sentiment in Asian markets.

All of which helped MSCI’s broadest index of Asia-Pacific shares outside Japan bounce 1.4%, having slid 2.5% last week. Chinese blue chips added 0.3%, with Japan’s Nikkei rising 1.1% and South Korea gaining 1.8%. South Korean President Yoon Suk Yeol on Monday flagged the possibility of vast oil and gas reserves in the sea off the country’s east coast.

The upcoming election results in India are also a focus for investors, as they wait to see if Prime Minister Narendra Modi will expand his alliance’s majority in parliament, which could lead to more economic reforms and bolster market confidence.

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Furthermore, the prospect of lower borrowing costs globally has been generally positive for equities, with the European Central Bank (ECB) expected to trim rates by a quarter point to 3.75% on Thursday. The ECB’s possible rate cut, ahead of the U.S. Federal Reserve, signals a shift in global monetary policy.

The markets are also implying a high chance of the Bank of Canada cutting rates at its meeting on Wednesday, adding to the global trend of easing monetary policy. While the situation remains fluid, investors are closely watching key economic data releases this week, including surveys on services and manufacturing to gauge the market sentiment.

In forex markets, the Japanese yen remains weak against major currencies, with the government intervening to stabilize its value. Gold prices continue to rise, supported by central bank buying and demand from China. Oil prices, on the other hand, have recovered after OPEC+ agreed to extend oil output cuts, providing some stability in the energy markets.

Overall, Asian share markets are buoyed by expectations of global rate cuts and positive economic indicators, but investors are mindful of inflationary pressures and geopolitical risks that could impact market sentiment in the near future.

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