Pre Asia open: Rate cut fever

Friday's slight pullback in stocks came after a week of impressive gains, marking new record highs for all three major indexes. The Dow Jones Industrial Average declined by 305 points, or 0.8%, while the broader S&P 500 saw a marginal dip of 0.1%. In contrast, the Nasdaq managed to eke out a modest gain of 0.2%.

Investors largely shrugged off concerns surrounding the Federal Reserve even before the central bank's policy announcement midweek. The market seemed to have already accepted the inevitability of the Fed holding off on rate cuts for the time being. Wednesday's Fed meeting, including the policy statement, updated projections, and Chairman Jerome Powell's press conference, didn't deliver any surprises with a hawkish tone. With expectations of a rate cut in June, stock market momentum continued to build.

Other potential obstacles to the market rally were also overcome, such as the news of the Justice Department suing Apple on Thursday. Despite a 4% decline in Apple shares following the announcement, there was a slight rebound in trading on Friday.

Global equities surged last week, marking their most robust performance of 2024. The driving force behind this surge is evident: a notable shift towards dovish monetary policies among central banks in developed economies.

With major central banks (excluding the BoJ) setting the stage for potential rate cuts in the second quarter, it's no surprise that risk assets have maintained their strong performance in the current environment.

While it's plausible that risk assets could experience a correction, the unambiguous indication is that policy restrictions will be loosened in the coming months. The crucial question remains: has this already been factored into asset prices?

Bottom line: Central banks are swiftly moving toward the starting line if they haven't already crossed it.