Asian Stocks Rise on Fed Rate-Cut Hopes, Boosting Tech Sector
Asian share markets experienced a significant rally on Tuesday, fueled by increasing optimism that the Federal Reserve will implement an interest rate cut in December. Meanwhile, investors showed strong interest in global technology stocks, dismissing worries that the sector might be overheating. MSCI’s broadest index of Asia-Pacific shares outside Japan increased by 1 percent, primarily driven by technology stocks, recovering some of the losses incurred last week when it declined by 4 percent. The index is set to experience a 3.8 per cent decline this month, marking its first monthly decrease since March. Japan’s Nikkei rose by 0.8 per cent in early trading on Tuesday following a holiday on Monday. The index experienced a decline of 3.5 per cent last week as a wave of risk-off sentiment took hold of the markets. “It’s encouraging to observe a broad spectrum of asset classes showing green on the screens this morning as volatility subsides slightly and the Fed put reasserts its influence,” stated Charlie Aitken.
“This exemplifies typical bull equity market behavior.” A brief, decisive pullback in stocks and sectors that have been at the forefront of the market, a cleansing of the over-leveraged at the lowest point, followed by a recovery driven by the most battered growth stocks and cyclicals. The likelihood of a US rate cut is increasing following remarks from Fed Governor Christopher Waller, who stated that current data suggests the US job market is sufficiently weak to justify another quarter-point reduction in interest rates. Markets are now reflecting an 85.1 per cent probability of a 25 basis point cut at the December meeting, as per reports, a notable increase from 42.4 per cent just a week prior. The U.S. central bank is scheduled to convene on December 9 and 10. Mary Daly, President of the San Francisco Federal Reserve Bank, expressed her support for lowering interest rates at the upcoming central bank meeting, citing a decline in the job market, in an interview.
During the Asian trading session, the yield on benchmark 10-year Treasury notes remained unchanged at 4.0344 percent. The two-year yield, which increases alongside traders’ expectations of a higher Fed funds rate, remained steady at 3.4872 percent during Asian hours after a decline of 2.5 basis points in the prior session. The abrupt change in rate cut expectations has had a minor impact on the dollar. The euro was last valued at $1.1522, having made modest gains overnight. The dollar index stood at 100.2 during early trading. Despite the dollar’s slight weakness this week, the Japanese yen has remained fragile, trading at 156.95 per dollar in early Asian hours, not far from the 10-month low of 157.90 it reached last week. The ongoing dispute between Tokyo and Beijing centers on a remark made by Japan’s Prime Minister Sanae Takaichi earlier this November, suggesting that a Chinese assault on Taiwan might provoke a military response from Japan. Takaichi and US President Donald Trump engaged in a conversation on Tuesday, subsequent to his call with Chinese President Xi Jinping on Monday. She stated that Trump elucidated US-China relations to her.
On Monday, Trump announced that he would be traveling to Beijing in April, following an invitation from the Chinese government. The proposed meeting was seen as yet another indication that diplomatic and political relations between the two countries are on the mend after their trade war truce. The Dow Jones Industrial Average increased by 0.44 percent, the S&P 500 climbed 1.55 percent, and the Nasdaq Composite surged by 2.69 percent, driven by significant gains in technology stocks. The session represented the Nasdaq’s most significant daily percentage increase since May 12 and the strongest two-day gain since November 2024. The U.S. stock and bond markets will observe a closure on Thursday in observance of the Thanksgiving holiday, with trading resuming for a half day on Friday. In commodities, Brent crude futures experienced a decline of 0.2 percent, settling at $63.16 a barrel, while US crude futures similarly fell by 0.2 percent, reaching $58.70 per barrel. Spot gold experienced a decline of 0.2 per cent, trading at $4,130 an ounce.
