Fed Easing Hopes Ignite Global Rally as Asia Shares Surge to Records

Softer U.S. inflation fuels rate-cut bets, sending bond yields down and equity markets roaring

Asian stock markets jumped to record levels Friday, following Wall Street’s lead, as investors grew increasingly confident that the U.S. Federal Reserve will begin cutting interest rates soon. Softer inflation data pushed down borrowing costs globally, lifting bonds and weakening the dollar.

Equity Markets Hit Highs Across Asia and Beyond

• Japan’s Nikkei climbed to another all-time high.
• South Korea, Taiwan, and China posted strong gains; Chinese blue-chips hit their highest in over three years, driven by expectations of AI-related earnings strength.
• European futures were also up: EUROSTOXX 50, FTSE, and DAX futures each rose by about 0.2%.

Inflation Data Boost Rate-Cut Expectations

The recent U.S. consumer price report showed softer than expected inflation, particularly in components relevant to the Fed’s preferred core PCE (Personal Consumption Expenditures) index. This reinforced expectations that a 25-basis-point rate cut is likely at the Fed’s next meeting. Some analysts now expect as much as 125 basis points of cuts over the next five FOMC meetings.

Treasury yields responded: 10-year yields dropped, easing pressure on mortgage rates and corporate borrowing.

Other Market Moves: Currencies, Gold, Oil

• The U.S. dollar weakened against the yen after U.S. and Japanese finance ministers reaffirmed they would not target currency levels.
• The euro held relatively steady, even as the ECB left rates unchanged and signaled a cautious stance.
• Gold prices hovered near record highs as investors sought safe havens in light of geopolitical and economic uncertainty.
• Oil prices fell modestly, pressured by projections of a growing supply surplus in 2026.

Risks & What to Watch Going Forward

• Inflation surprises remain the key risk. If inflation reads hotter than expected in upcoming data, rate-cut bets may get pushed back.
• Bond market volatility could return if global yields rise in response to economic surprises or fiscal pressures.
• Equity markets, especially in Asia, may be vulnerable to sentiment reversal if growth in key economies (e.g. China) disappoints.
• Currency and capital flow shifts: a weaker dollar could support exports but also stoke inflation in import-dependent nations.

In summary, easing inflation signals have catalyzed a surge in global markets. With Asia leading the charge, investors are betting that the Fed will take action soon, and bond yields and currency valuations are reflecting that shift. The core theme: soft inflation + rate-cut expectations = broader risk rally.