Stocks muted, gold at new peak as markets weigh Fed cut timing

The financial markets showed a subdued performance in Asia on April 11, 2024, as investors weighed the potential timing of further interest rate cuts from the Federal Reserve (Fed) in the United States. The uncertainty surrounding the inflation outlook in the US added to the cautious sentiment among traders.

The Fed has been widely expected to implement a series of rate cuts this year to counteract the economic impact of rising trade tensions and slowing global growth. However, recent data on inflation have been mixed, leaving some market participants questioning whether the central bank will indeed deliver on these expectations.

One of the key indicators that have fueled speculation about potential rate cuts is the producer price index (PPI), which measures the average change over time in the selling prices received by domestic producers for their output. A mild reading for PPI in March kept alive hopes for Fed easing this year, as it suggested that inflationary pressures may not be as strong as previously thought.

As a result of this uncertainty, stocks in Asia were trading in a narrow range on April 11. Japan's Nikkei 225 index closed 0.1% lower, while South Korea's Kospi finished flat. Hong Kong's Hang Seng Index and China's Shanghai Composite Index both gained modest ground.

Meanwhile, gold continued its upward trend and reached a fresh all-time high, as investors sought refuge in the safe-haven asset amid the market volatility and uncertainty about the Fed's monetary policy stance. The precious metal hit an intraday record of $1,785.50 per ounce, driven by expectations that the Fed will indeed deliver rate cuts this year to support the economy.

Despite the strong performance of gold, US Treasury yields remained relatively unchanged, with the benchmark 10-year yield hovering around 2.45%. This suggests that some investors remain skeptical about the need for aggressive rate cuts from the Fed and are instead focusing on the strong economic data coming out of the US, such as solid employment numbers and robust consumer spending.

Overall, the market sentiment remained cautious as investors continued to monitor developments regarding the Fed's monetary policy and the global economic outlook. The uncertainty surrounding these factors is likely to keep markets volatile in the coming days and weeks.