Asian Equities Rise as Bets on Fed Rate Cut Fuel Global Rally
Asian equities surged on Wednesday, following a global rally fueled by expectations that the Federal Reserve will soon start cutting interest rates. Stocks in Hong Kong opened higher, while those in mainland China saw a slight decline. Equity benchmarks in Japan and Australia climbed, with South Korean stocks remaining steady after US shares reached new highs, pushing global stocks to a new peak.
The optimism surrounding a potential rate cut by the Fed has led to a surge in risk appetite, with US retail sales data showing resilience among consumers, fueling hopes for a soft landing. This sentiment has driven a rotation into smaller stocks, with the Russell 2000 Index posting its best performance since April 2020.
Mitsushige Akino, president of Ichiyoshi Asset Management, noted that small-cap stocks in Japan are expected to strengthen following the rise of the Russell 2000 Index in the US.
Australian and Japanese yields followed the drop in their US counterparts overnight, while Treasury yields rose slightly on Wednesday morning in Asia. The dollar remained stable, while the yen fell for the third consecutive day against the greenback.
In the commodities market, gold held steady after a significant rally on Tuesday, reaching a record high of $2,469.66 per ounce. Meanwhile, West Texas Intermediate crude declined for the fourth consecutive day.
Key events to watch this week include Eurozone CPI data, US housing starts and industrial production figures, as well as the ECB rate decision.
Overall, the strength of the equity market has been supported by optimism that the economy can withstand the impact of Fed tightening. While gains for the Russell 2000 are seen as bullish, investors should be prepared for potential profit-taking in the coming sessions.
This story was produced with the assistance of Bloomberg Automation and Momoka Yokoyama.
