Equity markets across Asia experienced significant gains on Thursday, following a resurgence in Wall Street fueled by robust tech earnings, which helped alleviate concerns about persistent inflation. Notably, shares in Australia, Japan, and Hong Kong all advanced, while South Korean stocks exhibited fluctuations. Taiwan stocks marked an intraday record high on their first trading day since February 5, buoyed by a remarkable 9.8% surge in Taiwan Semiconductor Manufacturing Co.
Japan’s key equity index reached a three-year high relative to its broader counterpart, driven by strong earnings from major exporters, particularly technology firms, coupled with a weakened yen. The NT ratio, which measures the Nikkei 225 Stock Average against the Topix, hit its highest level since 2021, with the Nikkei inching closer to its 1989 record.
Homin Lee, senior macro strategist at Lombard Odier, noted that “Asian markets are following the lead of the US markets, which continue to anticipate a soft landing for the economy and positive earnings growth in 2024.”
Despite Japan’s economy slipping into recession unexpectedly, a Japanese official indicated that the country is on the verge of overcoming deflation. Meanwhile, the yen remained relatively stable near 150 per dollar, after reaching a three-month low earlier in the week.
US futures showed little change during Asian trading hours following a 1% rise in the S&P 500 on Wednesday, reclaiming the 5,000 mark. This gain came after Tuesday’s losses triggered by higher-than-expected US core inflation data for January, which complicated the path for Federal Reserve rate adjustments.
22V Research strategists, led by Dennis DeBusschere, reiterated their stance favoring risk-on factors and cyclical stocks to outperform throughout 2024, suggesting that January’s inflation uptick may be a one-off occurrence rather than a new trend.
Treasuries remained relatively stable after a rally on Wednesday, with Australia and New Zealand seeing declines in yields on Thursday. The dollar index showed slight weakness.
Taiwan Semiconductor Manufacturing Co. achieved a record high following an increase in its target price by Morgan Stanley, driven by anticipated growth in revenue from artificial intelligence chips this year.
Tech giants like Nvidia Corp, Microsoft Corp, and Apple Inc contributed to Wednesday’s gains in US stocks, with the NYSE Fang+ index rising twice as much as the broader market. Favorable earnings reports, such as Uber’s announcement of $7 billion in share buybacks and Robinhood Markets Inc.’s revenue surpassing estimates, also fueled market optimism.
Australian employment figures showed a slight increase at the beginning of the year, although unemployment rose to a two-year high, signaling a cooling labor market and sparking speculation about earlier interest rate cuts.
While mainland Chinese markets remained closed for the Lunar New Year holiday, the Golden Dragon index of US-listed Chinese companies climbed 3.5% in New York trading, indicating upward momentum for those stocks.
Traders have tempered expectations of Federal Reserve rate cuts, with the likelihood of a cut in March now deemed unlikely. Federal Reserve Bank of Chicago President Austan Goolsbee suggested that slightly higher inflation data over a few months would still be consistent with the central bank’s 2% target.
In Asia, upcoming data releases include January trade figures for India and a monetary policy decision in the Philippines. Indonesia saw Defense Minister Prabowo Subianto declare victory in Wednesday’s presidential vote.
Key Events This Week:
- US Empire manufacturing, initial jobless claims, industrial production, retail sales, business inventories (Thursday)
- ECB President Christine Lagarde speaks (Thursday)
- Atlanta Fed President Raphael Bostic speaks (Thursday)
- Fed Governor Christopher Waller speaks (Thursday)
- ECB chief economist Philip Lane speaks (Thursday)
- US housing starts, PPI, University of Michigan consumer sentiment (Friday)
- San Francisco Fed President Mary Daly speaks (Friday)
- Fed Vice Chair for Supervision Michael Barr speaks (Friday)
- ECB executive board member Isabel Schnabel speaks (Friday)
