HONG KONG (AFP) – Hong Kong led gains across most Asian and European markets yesterday thanks to a surge in tech giants, while the yen extended gains against the dollar on revived hopes for United States (US) interest rate cuts.
The gains come as traders turn their attention to the release of key US jobs data due later in the day, which could play a major role in the Federal Reserve’s (Fed) decision-making on when to lower borrowing costs.
A string of data this year showing inflation was holding stubbornly above target, while the economy and labour market remained in rude health, has in recent months seen investors lower their forecast for 2024 rate cuts from six in January to one or two now.
That has dented sentiment on trading floors, though that has been offset by a strong corporate earnings season and healthy company forecasts, helping to push equity markets higher.
Comments from Fed boss Jerome Powell on Wednesday appeared to breathe a little life into the rate-cut narrative when he said that, while he expected borrowing costs to stay high for longer, officials were unlikely to announce another hike.
The bank’s decision to slow the pace at which it shrinks its balance sheet, having bought up vast amounts of bonds previously to keep rates low, also provided some relief.
“While the Fed appears to have all but ruled out a rate hike, it also made clear it’s willing to keep rates higher for longer,” said Chris Larkin, of E*Trade from Morgan Stanley.
“The markets will be hungry for any data suggesting the economy isn’t heating up any more than it did in the first quarter.” National Australia Bank’s Tapas Strickland added, “The Fed will need an accumulation of evidence that inflation is easing sufficiently before they contemplate cutting rates.”
Wall Street’s three main indexes notched up sizeable gains on Thursday, with the Nasdaq piling on more than one per cent as tech outperformed again.
The sector was a key driver in Asia yesterday, helped by a post-market surge in Apple after it released forecast-topping earnings and announced a bumper share buyback.
Hong Kong was the standout thanks to buying of heavyweights including Alibaba and JD.com, with the Hang Seng Index up more than 20 per cent from its January low – putting it in a technical bull market.
“Even after the sharp rally, valuations for the China tech stocks are still well below (their) historical average” and compared with their peers, said Vey-Sern Ling at Union Bancaire Privee.
“The strong performance in the past two weeks is probably attracting more fund inflows for fear of missing out.”
Sydney, Singapore, Wellington, Bangkok and Jakarta were well in the green, though Seoul, Manila and Mumbai dipped.
London, Frankfurt and Paris all rose in the morning.
Tokyo and Shanghai were closed for holidays.
The yen extended gains, having soared against the greenback soon after the Fed rate meeting on Wednesday, which led to speculation that Japanese authorities had intervened in the forex market for a second time this week.
Estimates indicate officials spent more than USD20 billion supporting the unit.
That came after the yen rocketed on Monday after it fell to a new 34-year low of 160.17 per dollar, with reports saying more than USD30 billion was spent that time. However, the latest gains have come on the back of budding hopes US rates will be reduced this year.
