With markets embracing the potential of lower U.S. interest rates ahead of a major speech by Federal Reserve Chair Jerome Powell later this week, most Asian stocks rallied on Tuesday, following an overnight rally on Wall Street.
Although some traders had anticipated further unexpected rate cuts from the central bank, Chinese markets underperformed relative to their regional counterparts after the People’s Bank maintained its benchmark lending prime rate steady.
Wall Street provided a strong lead, and investors piled back into equities, particularly large-cap technology firms, as expectations of a September interest rate decrease grew. This helped other Asian markets.
In Asian trading, U.S. stock index futures saw a minor increase. This week, all eyes will be on Powell’s speech at the Jackson Hole Symposium on Friday. There, he may give more hints about the bank’s intentions to start lowering interest rates.
Asia’s top-performing stocks were Japanese, with the Nikkei 225 index hitting a three-week high and climbing 1.8%. TOPIX index increased by 1.2%.
The strength of heavyweight technology stocks, which increased in tandem with their American counterparts, was the main factor driving the Nikkei’s rise.
Among Japanese companies, Seven&i Holdings Co., Ltd. (TYO:3382), which operates convenience stores, was an exception, plunging more than 6% as investors booked profits on Monday’s surge. Following rumours that Canada’s Alimentation Couche Tard Inc (TSX: ATD) had approached Seven&i about a purchase, the shares shot up more than 20% on Monday.
More expansive The majority of Asian markets performed well. Due to the strength of technology stocks, South Korea’s KOSPI climbed 0.9%, while Australia’s ASX 200 added 0.2%.
The Reserve Bank of Australia’s August meeting minutes revealed that the bank had discussed raising interest rates due to concerns over sticky inflation, which restrained market gains in Australia.
Additionally, the RBA indicated that it will maintain high interest rates for an extended period—a trend that is unfavourable to Australian markets. Due to their significant trade exposure to China, Australian stocks were also negatively impacted by the likelihood of slow economic development in China.
After the People’s Bank of China maintained its benchmark lending prime rate, Chinese markets underperformed relative to their global counterparts, aborting a six-month rally.
The Hang Seng index in Hong Kong fell by 0.3%, while the Shanghai Shenzhen CSI 300 and Shanghai Composite indices lost 0.6% and 0.8%, respectively.
As anticipated, the PBOC maintained the same lending prime rate. However, some traders who were hoping for additional rate reductions in the nation were nonetheless let down by the decision, particularly in light of the central bank’s surprise rate cut in July.
Even while consumer spending and inflation in China improved somewhat in July according to the latest economic data, ongoing worries over the country’s faltering economy harmed public perception of it overall.
