Asian equities saw gains following a strong performance in global markets driven by a surge in major tech stocks, setting new records ahead of key US inflation figures scheduled for Thursday. Japan, Australia, and China led the regional advance, mirroring the bullish sentiment on Wall Street from the previous day. The S&P 500 and Nasdaq 100 each rose over 1%, contributing to a global equities index hitting new highs, buoyed by notable performers like Nvidia Corp. and Apple Inc. This streak marks the S&P 500’s longest winning streak since November.
Taiwan Semiconductor Manufacturing Co. achieved record trading levels after reporting robust second-quarter sales growth, driven by demand for advanced chips supplied to Nvidia and Apple. Apple, aiming for a 10% increase in new device shipments despite challenges in 2023, also bolstered market sentiment. In Asia, Sony Group Corp. and SK Hynix Inc. were prominent contributors to regional stock index gains.
Mark Hackett of Nationwide noted, “Markets remain remarkably calm despite the flood of data this week, including Fed Chair Powell’s testimony, CPI/PPI reports, and the beginning of earnings season.”
The core CPI, excluding volatile food and energy costs, is expected to show a modest 0.2% increase in June, marking the smallest consecutive rise since August, a trend likely to reassure Federal Reserve officials.
Anna Wong from Bloomberg Economics commented, “June’s CPI report looks to be another ‘very good’ report that should boost the FOMC’s confidence about the inflation trajectory,” signaling potential rate cuts starting in September.
Market expectations are now pricing in two Fed rate cuts in 2024, with a higher likelihood of the first cut occurring in September. The US dollar remained stable, while the yen, Australian dollar, and New Zealand dollar made slight gains against it.
Investors in Asia are closely monitoring regulatory changes by the China Securities Regulatory Commission aimed at tightening rules on short selling and high-frequency trading to enhance market stability. Sentiment towards Chinese stocks has been cautious ahead of the upcoming Third Plenum.
In the US, anticipation builds for the consumer-price index as Federal Reserve Chair Jerome Powell indicated a readiness to cut rates without waiting for inflation to drop below 2%. Powell highlighted cooling in the labor market and ongoing adjustments in the Fed’s balance sheet and commercial real estate concerns.
Krishna Guha from Evercore ISI remarked, “The key takeaway from his testimony is the Fed’s assessment of the balance of risks is shifting in ways that – if supported and sustained by incoming data – will deliver a rate cut in September.”
Elsewhere, Bank of England Chief Economist Huw Pill’s remarks kept markets guessing on the timing of a rate cut, prompting adjustments in trader expectations. In Asia, the Bank of Korea opted to maintain its benchmark interest rate, awaiting further evidence of cooling inflation trends.
Economic updates from Asia include consumer confidence figures from Thailand and a monetary policy decision from Malaysia. Market watchers are also awaiting money supply and lending data from China later in the day.
Australian and New Zealand bonds showed minimal movement early Thursday, while oil prices edged higher and gold held steady after a consecutive session gain on Wednesday.
