By Rae Wee
SINGAPORE (Multibagger) - Asian stocks defied the global trend by continuing their rally on Thursday, driven by ongoing optimism surrounding China's aggressive stimulus measures. However, there are indications that some of this enthusiasm is starting to wane.
Despite Wall Street closing lower overnight and global stock indexes surrendering their earlier gains, equities in Asia remained predominantly in the green.
Chris Weston, head of research at Pepperstone, commented, "After such a strong run in the past few days, one could argue the selling was largely driven by profit-taking, while others will suggest that it symbolizes a belief that the PBOC's policy stimulus is in no way a game changer and will fail to lift consumption in any capacity."
MSCI's broadest index of Asia-Pacific shares outside Japan rose more than 1% to an over two-year high on Thursday, with Japan's Nikkei also surging 2.4%.
Hong Kong's Hang Seng index similarly advanced 1.5%, while the mainland CSI300 blue-chip index reversed early losses to last trade 0.3% higher.
Furthermore, Bloomberg News reported that China is considering injecting up to 1 trillion yuan ($142.39 billion) of capital into its largest state banks to bolster their ability to support the struggling economy.
Investors are now awaiting a series of speeches from Federal Reserve policymakers later in the day, including remarks from Chair Jerome Powell, which could offer more insight into the U.S. rate outlook. Additionally, the release of the core personal consumption expenditures (PCE) price index, the Fed's preferred measure of inflation, is scheduled for Friday.
Jeff Ng, head of Asia macro strategy at SMBC, stated, "I don't think the reaction will be excessive, but the direction will be there... If, let's say, prices are sticky, then maybe that will slightly dampen expectations for a 50-basis-point (rate cut)."
Market expectations are currently pricing in a roughly 62% chance of a 50bp rate cut at the Fed's November policy meeting, with a total of 77bps worth of cuts anticipated by the year end.
Shifting expectations regarding the extent of the Fed's rate cuts for this year and next have influenced the dollar's performance, which has largely remained rangebound over the past month. The dollar regained strength on Thursday, following earlier losses as China's support measures boosted risk appetite.
In the commodities market, oil prices saw a slight increase, with Brent futures rising 0.27% to $73.66 a barrel, while WTI crude edged up 0.2% to $69.82 per barrel. Gold remained steady at $2,659.56 an ounce, after reaching a record high on Wednesday.
Analysis:
The Asian stock market continues to surge on the back of China's stimulus efforts, despite global uncertainties. Investors are closely monitoring Fed policymakers' speeches and the upcoming inflation data release for further guidance on the U.S. rate outlook.
Market expectations for rate cuts and the dollar's performance are key factors influencing investor sentiment. Additionally, commodities like oil and gold are experiencing fluctuations based on market dynamics.
Overall, understanding these market movements and policy decisions can help individuals make informed investment choices and navigate their financial portfolios effectively.