China surge leads Asia stocks higher; Nvidia a hurdle

Chinese shares led Asia higher on Monday as investors gave a cautious welcome to the likely resumption of US interest rate cuts, while hoping artificial intelligence superstar Nvidia’s results this week will help justify the sector’s stratospheric valuations.

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US Federal Reserve Chair Jerome H. Powell's dovish change of course has seen futures price in an 84% chance of a quarter-point rate cut in September, and at least 100 basis points of easing to 3.25-3.5% by the middle of next year.

The shift shoved Treasury yields and the dollar lower, flattering the outlook for corporate earnings, though it also implies policymakers now see more danger of a downturn in employment and the economy.

“The news reinforces our view that the Fed will ease in response to softening labor demand and that risk to our forecast for a material downshift in global growth this quarter is skewed to the upside,” said Bruce Kasman, global head of economic research at JPMorgan.

The market’s euphoria will also be tested by a reading on US personal consumption prices on Friday that is expected to show core inflation creeping up to its highest since late 2023 at 2.9%.

“The report should reinforce the message that a rebound in service price inflation is combining with tariff-related pressures to push core inflation towards a 4% annualized rate,” warned Mr. Kasman.