Asian stock markets rallied on Friday as cooling U.S. labor data reduced expectations for an imminent Federal Reserve interest rate hike and regional economic indicators showed continued expansion.

Key Points

• MSCI’s broadest index of Asia-Pacific shares outside Japan rose 2.2% following two days of losses.
• South Korea’s Kospi surged over 6% as investors increased their holdings in major chipmaker stocks.
• Japan’s Nikkei 225 index recovered from early losses to trade 1.2% higher by the end of the session.
• June Purchasing Managers' Index data confirmed service sector expansion in both Japan and China.
• U.S. job growth slowed significantly in June, with the unemployment rate settling at 4.2%.
• Fed funds futures now indicate a 46.8% probability that the U.S. central bank will maintain current interest rates through September.

Why it Matters

The cooling U.S. labor market suggests that the Federal Reserve may delay further interest rate hikes, providing a boost to investor sentiment across global equity markets. This shift in monetary policy expectations helps stabilize regional economies that rely on favorable borrowing conditions and steady international demand.