Asian Stocks Rise on Optimism of Fed Rate Cuts, Yen Falls
Asian stocks saw gains on Tuesday, following a positive trend on Wall Street fueled by optimism that the Federal Reserve will begin cutting interest rates this year. The yen also dropped, adding to the positive sentiment in the markets.
A gauge of regional equities is on track for its longest winning streak since February, with Japanese, Korean, and Australian shares leading the rally. The Nikkei 225 surged by as much as 1.6% as investors in Tokyo returned to work after a holiday. However, markets in Hong Kong and Shanghai experienced some volatility, swinging between losses and gains.
The yen’s decline was attributed to comments from Japan’s top currency official, Masato Kanda, who stated that there was no need for government intervention in the market if it is functioning properly.
Global equity markets are also receiving a boost from investors revising their Fed policy bets following soft US jobs data. Additionally, Beijing’s supportive policy stance is helping to lift Chinese shares and the onshore yuan.
Ray Sharma-Ong of abrdn Plc highlighted the potential for higher growth and earnings in Asia compared to the US, along with cheaper valuations and higher carry currencies. He noted that in a Fed easing cycle, Asia tends to outperform.
As investors cautiously increase their bets for Fed easing this year, the bond market has reacted positively to signs of a cooling US labor market. The yield on US 10-year Treasuries remained stable on Tuesday, while Australia’s 10-year yield also held steady.
Looking ahead, key events this week include Australia’s rate decision, Eurozone retail sales, UBS, Walt Disney, and BP earnings, as well as speeches from Fed officials and central bank decisions in the UK and Japan.
Overall, the market sentiment in Asia remains positive, with improving news flow in China and favorable conditions for Chinese markets in the near term. As the Fed potentially enters an easing cycle, mainland China is expected to benefit more than Japan, according to HSBC Holdings Plc strategists.
In terms of market movements, S&P 500 futures were flat, Japan’s Topix rose, Australia’s S&P/ASX 200 gained, Hong Kong’s Hang Seng fell, and the Shanghai Composite saw a slight decline. Currencies were relatively stable, with the yen weakening against the dollar. Bitcoin remained steady, while Ether experienced a slight dip.
This news story was produced with the assistance of Bloomberg Automation, with contributions from Jason Scott and Abhishek Vishnoi.
