Stock Markets in Asia Rise in Response to Anticipated Interest Rate Reduction
Asian Stock Markets Show Mixed Reactions to Fed Rate Cut Expectations
Asian stock markets ended mostly higher on Wednesday, but with a cautious tone, as the possibility of Federal Reserve (Fed) interest rate cuts has had a mixed impact on the region's equities. Bets on imminent Fed rate cuts are being pared back, leading to a subdued market reaction rather than strong rallies or declines.
In China, the Shanghai Composite index rose 0.48 percent, but the upside was capped by heightened trade tensions with Canada. China announced more levies on Canadian rapeseed after an anti-dumping probe.
Japanese markets, which rose sharply earlier in the day, hit a fresh record high, but shares in Japan declined slightly towards the end of trading. July’s core inflation came in higher than expected (3.1% vs. 3%), which contributed to the yen stabilizing but kept Japanese stocks under pressure.
South Korea’s stock market advanced despite the cautious tone, suggesting some resilience or perhaps a more optimistic domestic or sectoral sentiment in the face of rate uncertainty.
Shares in Australia declined slightly along with Japan, amid investor caution as rate-cut expectations became less certain.
Hong Kong's Hang Seng index jumped 2.58 percent, while the Nikkei average closed up 1.30 percent at a record high level of 43,274.67. Seoul stocks rallied, led by gains in the tech sector, with Advantest, Renesas Electronics, Tokyo Electric Power, Yokohama Rubber, and Asics surging in Japanese markets. Samsung Electronics rose 1.1 percent and SK Hynix jumped 3.4 percent.
The tech-heavy Nasdaq Composite surged 1.4% and reached a new record closing high, while the broader All Ordinaries index closed 0.52 percent lower. New Zealand's benchmark S&P/NZX-50 index finished marginally higher at 12,766.54.
Elsewhere, LG Display soared 22.5 percent on news of its victory in a trade secret infringement lawsuit against Chinese BOE, while Asics soared 18 percent after raising its full-year forecast. Gold edged higher in Asian trade as the dollar weakened on rate cut expectations, and the S&P 500 rallied 1.1% to also reach a new record closing high.
The cautious stance across Asian markets shows investors balancing hope for rate cuts (which could boost risk assets) against concerns about persistent inflation and stronger US economic fundamentals. The cooling of enthusiasm signals that markets are awaiting clearer Fed guidance at the upcoming Jackson Hole symposium rather than anticipating assured easing.
Additional context: Stronger US economic data and a hawkish tone from Fed officials have strengthened the view that rate cuts are less likely in the immediate future. Futures tied to US tech-heavy indices (e.g., Nasdaq 100) fell slightly, reflecting global sensitivity to US monetary policy shifts.
In company news, Commonwealth Bank of Australia posted strong earnings but still slumped 5.4% in value, while AGL Energy reported a 21% drop in annual underlying profit, causing a 13.1% decline. Tencent Music Entertainment Group soared 15.6 percent in Hong Kong. U.S. Treasury Secretary Scott Bessent wants the Fed to consider a larger, 50 basis-point rate cut in September.
Oil held a decline after the International Energy Agency predicted a record surplus next year in global oil markets.
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- In the midst of Asian stock markets showing a cautious tone amid Fed rate cut expectations, the tech sector in Japanese markets rallied, with companies like Advantest, Renesas Electronics, Tokyo Electric Power, Yokohama Rubber, and Asics surging, indicating a possible optimism towards technology giants despite rate uncertainties.
- Despite the S&P 500 in the US rallying and reaching a new record closing high due to rate cut expectations, LG Display in South Korea surged a remarkable 22.5 percent following a victory in a trade secret infringement lawsuit against Chinese BOE, suggesting that the tech industry's performance may not solely depend on monetary policy shifts.
