Asian equities climbed to all-time highs on Wednesday, with the MSCI Asia Pacific Index rising 1%, driven by softer-than-expected US retail sales that bolstered bets the Federal Reserve may cut interest rates later this year. Emerging market stocks also reached record levels, widening their year-to-date outperformance against European and US equities.
Futures for the S&P 500 and Nasdaq 100 pointed to potential gains on Wall Street, while Treasury futures extended their rise after 10-year US bond yields fell to their lowest in roughly a month. Gold gained 0.4%, benefiting from expectations of lower rates, as money markets priced in slightly higher odds of three Fed cuts this year, with two already fully priced.
The dollar weakened against all Group-of-10 currencies, reflecting reduced expectations for tighter monetary policy. Analysts noted that the unexpectedly weak December retail sales signaled slower consumer momentum, heightening market anticipation that the Fed may ease rates later in 2026.
Attention now turns to the upcoming US jobs report and inflation data, which are expected to provide clearer guidance on the Fed’s policy trajectory. “A weak print could push sentiment further toward risk-off if growth worries start to build, but a solid print may ease some of those concerns,” said Bret Kenwell of eToro.
