Markets watch: Asian stocks pause after rally; oil rises on Fed cut hopes

Asian shares moved in a tight range on Thursday, pausing after three days of gains fuelled by growing expectations that the US Federal Reserve will cut interest rates next month. Japanese stocks pulled back from record levels, while South Korea and Australia advanced.Japan’s Nikkei 225 fell 0.31% and the broader Topix dropped 0.64%, reversing from Wednesday’s all-time high close. South Korea’s Kospi gained 0.39% while the small-cap Kosdaq was flat. In Australia, the S&P/ASX 200 rose 0.49% after official data showed the country’s unemployment rate eased to 4.2% in July, in line with economists’ forecasts, down from 4.3% in June. Employment rose by 24,500 last month, slightly below expectations of a 25,000 increase, as per news agency Reuters. The Australian dollar climbed to its highest level since late July on the news.Chinese equities were also in focus after a US-listed gauge of mainland stocks rose for a second session, supported by Tencent’s latest earnings, Bloomberg reported. In the US, stocks closed at record highs overnight, led by Apple and Amazon, while Bitcoin hit a fresh all-time peak.Market sentiment is being underpinned by bets that the Fed will deliver a quarter-point cut in September, with CME FedWatch data putting the probability at nearly 100%. Bloomberg quoted Ulrike Hoffmann-Burchardi of UBS Global Wealth Management as saying, “As the labour market continues to weaken, we think the US central bank will resume interest rate cuts next month, with 25-basis-point cuts at each meeting through January 2026 for a total of 100 basis points.”US treasury secretary Scott Bessent has gone further, suggesting a 50 basis-point reduction could be on the table, and arguing the Fed’s benchmark rate should be at least 1.5 percentage points lower. “We could go into a series of rate cuts here, starting with a 50 basis-point rate cut in September,” he said on Bloomberg Television.Meanwhile, oil prices edged higher, recovering from a sharp drop the previous day. Brent crude rose 28 cents, or 0.43%, to $65.91 a barrel, while US West Texas Intermediate added 23 cents, or 0.37%, to $62.89, according to Reuters. Prices were supported by expectations of lower US interest rates, which could boost energy demand, and geopolitical risks surrounding an upcoming meeting between US President Donald Trump and Russian President Vladimir Putin on August 15.Trump has warned of “very severe consequences” if Putin fails to agree to a ceasefire in Ukraine during talks in Alaska on Friday. As per Reuters, analysts at Rystad Energy noted in a client report that “the uncertainty of US-Russia peace talks continues to add a bullish risk premium given Russian oil buyers could face more economic pressure.”However, gains in crude were capped by bearish signals from supply data and forecasts. US crude inventories unexpectedly rose by 3 million barrels last week, against expectations of a small draw, according to the US Energy Information Administration. In addition, the International Energy Agency forecast that global oil supply growth in 2025 and 2026 will outpace earlier projections as OPEC+ and other producers ramp up output.