Asian Shares Skyrocket as Tech-Driven Rally Boosts Market Sentiment
By Stella Qiu
SYDNEY (Multibagger) - Asian shares soared on Thursday, following a surge in tech stocks on Wall Street. The dollar maintained its gains after U.S. core inflation exceeded expectations, dampening hopes for a significant rate cut by the Federal Reserve next week.
Investors are eagerly awaiting a policy decision from the European Central Bank later today, with a rate cut almost guaranteed. The big question now is whether the ECB will make further moves in October and December.
MSCI's broadest index of Asia-Pacific shares outside Japan jumped 1%, while Japan's Nikkei 225 surged 3%, supported by a weaker yen. The yen retreated from its 2024 high of 140.71 per dollar to trade flat at 142.40 per dollar, possibly influenced by hawkish remarks from a senior Bank of Japan official advocating for a rate hike to at least 1%.
European markets also saw gains, with EUROSTOXX 50 futures up 1.2% and FTSE futures up 0.9%. U.S. stock futures, however, were slightly lower.
The overnight data revealed that core consumer price index (CPI) in the U.S. rose by 0.28% in August, surpassing the expected 0.2% increase. This led to a sharp decline in the likelihood of a half-point rate cut by the Fed next week, with the probability now standing at just 15%.
Chris Weston, head of research at Pepperstone, commented, "We are now comfortable predicting a 25bp cut for September, but we are also open to the possibility of a 50bp cut in the November FOMC meeting if the U.S. payrolls report in October disappoints."
Despite the disappointment over core inflation figures, tech stocks lifted Wall Street, with companies like Nvidia surging 8% on reports that the U.S. government may allow the company to export advanced chips to Saudi Arabia. Regional tech-heavy markets followed suit, with Taiwan rising 2.2% and South Korea gaining 1.1%.
Meanwhile, China's markets remained subdued, while Hong Kong's Hang Seng Index edged 0.4% higher.
In the currency market, the dollar traded near a four-week high against the euro, which dipped to $1.1007, close to Wednesday's low of $1.1002. Short-dated U.S. Treasuries saw a sell-off, with two-year Treasury yields holding at 3.3193% and ten-year yields at 3.3291%, resulting in a slightly flatter 2-10-year yield curve.
Oil prices rebounded on concerns about Hurricane Francine disrupting U.S. production. Crude futures held at $70.65 a barrel, after a 2% increase overnight, finding support at $68.69, the lowest level in nearly three years. Gold traded at $2,513.75 an ounce, just below its record high of $2,531.60.
Analysis: The surge in Asian shares and tech stocks, combined with the stronger dollar and higher oil prices, indicate positive market sentiment. Investors are closely monitoring central bank decisions and economic indicators for clues about future monetary policy. The potential impact on interest rates, currency valuations, and commodity prices could affect investment strategies and financial planning for individuals and businesses alike.