The recovery in global stock markets persisted in Asia, buoyed by gains on Wall Street after recent US labor market data eased recession fears. Markets across Japan, South Korea, and Australia saw notable increases, while Hong Kong equities held their gains. However, mainland Chinese markets struggled as it became apparent that a better-than-expected inflation report was likely influenced by seasonal factors, such as weather conditions. Singaporean markets remained closed.
Wall Street Rally Boosts Futures
US stock futures rose in Asia, reflecting a rally on Wall Street from Thursday. The S&P 500 recorded its strongest performance since November 2022, with a notable 3.1% advance in the Nasdaq.
The US dollar declined, while a gauge tracking emerging-market currencies reached its highest level since April 2022. Treasury yields also saw a decrease in Asia after a three-day increase.
Improved Risk Appetite and Economic Focus
Investor sentiment improved following a favorable US jobless claims report, which alleviated concerns stemming from last week’s disappointing employment data. Attention now shifts to upcoming US economic indicators, including consumer price data, set for release next week.
Tony Sycamore, market analyst at IG Australia, commented on the situation, noting, “The storm clouds have parted” for Asian markets. He added that markets are expected to trend higher unless another growth scare emerges, although Japan might not be a primary focus for investors in the near term.
Uncertain Rebound Amid Policy Signals
The sustainability of the recent market rebound remains uncertain as investors assess mixed signals from policymakers. Federal Reserve Bank of Kansas City President Jeffrey Schmid indicated on Thursday that he is not inclined to support a reduction in interest rates while inflation remains above target.
Swap traders have reduced expectations for aggressive Fed rate cuts in 2024. At one point, interest-rate swaps had implied a 60% chance of an emergency rate cut by the Fed before its next scheduled meeting in September. Current market pricing suggests approximately 40 basis points of cuts for September.
Corporate and Commodity Updates
In Japan, shares of Tokyo Electron Ltd. surged following the company’s revised profit forecast for the fiscal year ending in March and a better-than-expected sales performance.
The yen remained stable against the dollar after a three-day period of weakening.
Oil prices rose slightly following a rally on Thursday, amid ongoing tensions in the Middle East. Conversely, gold prices experienced a decline.
Trade Concerns in Canada
In Canada, steel and aluminum producers are urging Prime Minister Justin Trudeau’s government to promptly impose new tariffs on Chinese imports. They argue that a surge in metal products from China is flooding the Canadian market and jeopardizing local jobs.
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