Asian stocks have generally been on the rise in recent market trends. This was influenced by strong performance on Wall Street and increasing optimism about corporate earnings. The dollar remained strong and near a two-month high, reflecting market expectations that the Federal Reserve will cut interest rates more gently next month.
Japan’s Nikkei rose 1%, hitting a three-week high after Monday’s close. Meanwhile, MSCI’s Asia-Pacific stock index excluding Japan rose slightly by 0.2%. This slight increase is the result of gains in Taiwan and Australia partially offset by declines in the Chinese market.
China’s blue chip stocks fell 0.4%, while Hong Kong’s Hang Seng index fell 0.3%. Investors are hoping for more concrete new stimulus plans following reports that Beijing could issue an additional 6 trillion yuan ($850 billion) in government bonds to support the economy over the next three years.
Analysts at BlackRock Investment Research are cautiously optimistic about Chinese stocks, citing policy stimulus signals and low valuations. He also maintained a positive outlook on U.S. stocks and the overall AI theme, acknowledging that concerns about high valuations could lead to a temporary sell-off. Analysts recommended considering global exposure to undervalued stocks and markets with potential growth drivers.
In US markets, the S&P 500 and Dow Jones index hit record highs, led by the semiconductor sector, with Nvidia up 2.4%. Third-quarter earnings season got off to a positive start with better-than-expected results from JP Morgan and Wells Fargo. Additional earnings reports are expected from major banks such as Citi, Bank of America, and Goldman Sachs.
In the foreign exchange market, the dollar fell slightly against the yen, and the euro stabilized ahead of the European Central Bank’s interest rate decision. The prevailing view is that the Fed would opt for a smaller 25 basis point cut rather than a 50 basis point cut, which would reflect a growing economy without the risk of overheating.
Federal Reserve officials emphasized the need to be cautious in adjusting interest rates. Federal Reserve Board member Christopher Waller insisted on caution about cutting interest rates, while Minneapolis Fed President Neel Kashkari expected a more modest cut. Market traders are generally expecting a 25 basis point cut from the Federal Reserve next month.
In bond markets, U.S. Treasury yields rose slightly in early Asian trading. The yield on two-year Treasury bonds rose to 3.9533% and the yield on 10-year bonds rose to 4.0885%.
Oil prices continued to decline for three consecutive trading days, with futures falling 2.9% to $75.22 per barrel. The fall in oil prices was driven by concerns about falling demand and easing tensions amid reports that Israel could target Iranian military facilities, reducing the risk of immediate supply disruptions.
Gold was trading slightly lower at $2,648.57 per ounce.
This article was written with contribution from Reuters.
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