Asian equities saw an upward trend on Thursday, with stocks in Japan, South Korea, and Australia advancing.
This follows a record-setting session for US stocks, with the S&P 500 hitting its 44th all-time high of the year.
All eyes are now on the upcoming US inflation report, which may heavily influence the Federal Reserve’s approach to interest rate easing in the near term.
In Hong Kong, equity futures also pointed to gains, despite a steep drop in mainland China’s benchmark index the previous day, which marked its biggest decline in more than four years. In contrast, an index of US-listed Chinese companies fell during New York trading.
Meanwhile, US Treasury yields remained steady in early Asian trading, following a modest rise during Wednesday’s session in New York.
The Bloomberg Dollar Spot Index also held steady, having increased by 0.4% the previous day, marking its eighth consecutive day of gains.
The Japanese yen remained largely unchanged, trading at approximately 149 yen per dollar after weakening to its lowest level since mid-August.
China’s economic outlook remains uncertain
Chinese stocks continue to face volatility, with little indication of immediate economic support from Beijing.
Hong Kong’s volatility index slightly dipped on Wednesday, yet remained significantly above its historical average, reflecting ongoing investor concerns.
A key issue for the market is whether Chinese authorities will introduce more fiscal stimulus. Investors are watching closely, as officials have announced a press conference to discuss economic policies over the weekend.
Amidst this uncertainty, Taiwan Semiconductor Manufacturing Co. (TSMC) offered a rare bright spot, reporting a stronger-than-expected 39% increase in quarterly revenue. However, markets in Taiwan remained closed on Thursday.
Wall Street’s record highs driven by tech stocks
In the US, the S&P 500 gained 0.7% on Wednesday, reaching a new record high, with tech stocks continuing to lead the rally.
Apple Inc. rose by 1.7%, while Nvidia Corp. ended a five-day winning streak.
Tesla Inc. saw a slight dip as investors awaited the highly anticipated launch of its Robotaxi service.
Alphabet Inc., however, fell by 1.5% following reports that the US government may pursue a breakup of Google as part of a historic antitrust case targeting Big Tech.
Solita Marcelli, chief investment officer for the Americas at UBS Global Wealth Management, attributed tech’s recent gains to prior underperformance, which had created buying opportunities.
“We remain optimistic about the technology sector, particularly in relation to artificial intelligence,” she said, as quoted by Reuters.
We believe market volatility presents a chance to increase long-term exposure to AI.
Inflation data and Fed policy in focus
Investors are now awaiting the release of US consumer price data, which is expected to show a continued moderation in inflation.
The September consumer price index (CPI) is predicted to have increased by just 0.1%, the smallest rise in three months, with a year-on-year increase of 2.3%.
Core inflation, which excludes volatile food and energy prices, is projected to have risen by 0.2% month-on-month and 3.2% year-on-year.
Despite the market’s anticipation of further interest rate cuts by the Federal Reserve, recent strong job market data has led to speculation that a 50-basis-point rate cut is increasingly unlikely.
Instead, the focus may shift to smaller cuts, particularly after minutes from the latest Federal Reserve meeting revealed internal debate.
While Fed Chair Jerome Powell had suggested a more significant cut in September, some policymakers favored a more cautious approach.
David Russell, Vice President at TradeStation, told Reuters:
Policymakers agree inflation is fading and they see potential weakness in job growth. That keeps rate cuts on the table if needed. The bottom line is that Powell might have the market’s back headed into the year end.
Commodities: oil holds steady, gold stabilizes
In the commodities market, oil prices remained steady as US crude inventories increased, while investors kept a close watch on China’s forthcoming fiscal policies.
Gold, which had seen declines in the past six sessions, showed little movement on Thursday.
As markets continue to digest inflation data and monitor central bank moves, the overall sentiment remains one of cautious optimism, particularly in the tech sector, where artificial intelligence is driving long-term growth expectations.
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