SYDNEY: Asian stocks were taking a breather on Monday after global equities enjoyed their best week in nine months on expectations the U.S. economy would dodge a recession and cooling inflation would kick off a cycle of interest rate cuts.
The prospect of lower borrowing costs saw gold clear US$2,500 an ounce for the first time and the dollar dip against the euro, though both the safe haven yen and Swiss franc receded as risk appetites recovered.
Federal Reserve members Mary Daly and Austan Goolsbee were out over the weekend to flag the possibility of easing in September, while minutes of the last policy meeting due this week should underline the dovish outlook.
Fed chair Jerome Powell speaks in Jackson Hole on Friday and investors assume he will acknowledge the case for a cut.
"Although it may be too early to declare victory - and central bankers will certainly be prudent to avoid this in their official rhetoric - the inflation scare that had dominated the policy debate since prices started to soar during the pandemic has now largely vanished," said Barclays economist Christian Keller.
"Inflation may not be quite at the 2 per cent target yet, but it is close and going in the right direction."
Futures are fully priced for a quarter-point move, and imply a 25 per cent chance of 50 basis points with much depending on what the next payrolls report shows.
Analysts at Goldman Sachs cautioned that annual benchmark revisions to the jobs series are due on Wednesday which could see a large downward revision of between 600,000 and one million positions, though this would likely overstate the weakness of the labour market.
For now, the expectation of a softer than soft landing for the U.S. economy has S&P 500 futures up 0.2 per cent and Nasdaq futures ahead by 0.3 per cent, on top of last week's gains.
MSCI's broadest index of Asia-Pacific shares outside Japan edged up 0.2 per cent, having rallied 2.8 per cent last week.
Japan's Nikkei slipped 0.4 per cent, but that followed a near 9 per cent bounce last week.
The Fed is hardly alone in contemplating looser policy, with Sweden's central bank expected to cut rates this week, and possibly by an outsized 50 basis points.
In currency markets, the euro was steady at US$1.1025 , just below last week's top of US$1.1047. The dollar stood at 147.79, having been as high as 149.40 last week.
"The overall Fed message this week is likely to reassure market participants looking for confirmation that policy rate cuts are now imminent," said Jonas Goltermann, deputy chief markets economist at Capital Economics.
"As such, the greenback may well remain under pressure in the near term, although given the extent to which Fed easing is already discounted, we doubt there is that much further dollar weakness in store."
A softer dollar combined with lower bond yields to help gold hold at US$2,506 an ounce, and near an all-time peak of US$2,509.69.
Oil prices dipped again as concerns about Chinese demand continued to weigh on sentiment.
Brent fell 29 cents to US$79.39 a barrel, while U.S. crude lost 27 cents to US$76.38 per barrel.