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US stock prices climb, buoyed by optimism for interest rate reductions by the Federal Reserve

Stock markets in Asia plummeted on Monday, mirroring Wall Street's downfall, as worries about the U.S. economy intensified, prompting investors to heavily discount the likelihood of an interest rate hike.

Markets surge as optimism about interest rate reductions in the U.S. persists among investors
Markets surge as optimism about interest rate reductions in the U.S. persists among investors

US stock prices climb, buoyed by optimism for interest rate reductions by the Federal Reserve

In a surprising turn of events, the U.S. job report for July 2025 has caused significant market volatility and raised concerns over the U.S. economic outlook. The report, which showed only 73,000 jobs added and major downward revisions to previous months, has sparked a wave of uncertainty across global stocks, interest rates, and currency markets.

The labor market slowdown is particularly concerning. July’s payroll growth was well below the expected 110,000, and the three-month average job gain shrank to 35,000, the weakest post-pandemic period. Unemployment ticked up to 4.2%, with long-term unemployment and disparities rising, particularly among Black Americans where unemployment rose to 7.2%.

The weak data has increased expectations that the Federal Reserve may soon cut rates to support growth. Some analysts expect a possible large cut (e.g., 50 basis points) as soon as September 2025. The rise in bond-market volatility, a cautious stance on equities, and currency fluctuations driven by uncertainty over the U.S. economic data and monetary policy direction are all indicative of this shifting sentiment.

Global markets have felt the impact of this uncertainty. Stocks faced volatility and negative sentiment due to fears of a stagnant economy and trade uncertainties linked to tariffs. The weak data has also led to a reassessment of the rate outlook, with the chance of a September rate cut from the Federal Reserve now at 85%.

The dollar has seen a significant rise, with the euro down 0.2% at $1.156 and the pound softer at $1.327 ahead of Thursday's Bank of England meeting. The Swiss franc took a beating, with the dollar up 0.6% as markets reopened in Zurich after a public holiday on Friday, when Trump announced a 39% tariff on Swiss imports.

The rise in oil prices has also extended its latest slide, with Brent crude futures down 0.2% to $69.58 a barrel. Gold prices have remained relatively stable, with the dollar up 0.4% against the yen at 148.

The decision to fire the head of Labor Statistics has added nervousness over the credibility of U.S. economic data. The Fed's credibility and the veracity of the statistics on which they base their policy decisions are now under the spotlight.

As the situation unfolds, market participants are watching Fed communications closely against tariffs and political pressures, raising unease about the Fed’s independence and the credibility of U.S. economic data amid ongoing political tensions. This sentiment partly underpins the cautious reaction in markets.

In the face of these challenges, global stocks rose on Monday, and gold prices have remained relatively stable. The Bank of England is expected to cut rates by a quarter point at its meeting on Thursday, which may provide some relief to the global economy. However, the overall outlook remains uncertain, with the U.S. economic data and monetary policy direction continuing to shape investor behavior.

  1. The weak U.S. job report and the following market volatility have led to a reevaluation of investment strategies, with many investors reassessing their approach to both the stock-market and financial sectors, as well as reconsidering their investments in trading.
  2. As concerns over the U.S. economic outlook grow, some analysts are suggesting a shift towards more conservative investment strategies, including bonds, as the Federal Reserve considers cutting interest rates, potentially impacting the overall interest in stock-market investing.

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