Asian markets surge on fed's rate-cut expectations

Asian markets experienced a significant uptick on Thursday, with Hong Kong spearheading the gains, fueled by investor optimism surrounding potential rate cuts by the US Federal Reserve in the coming year.

Since the Federal Reserve’s recent meeting, where it hinted at the possibility of concluding its rate-hike cycle amidst a global slowdown in inflation, global markets have maintained a positive trajectory.

With the exception of Tokyo, most Asian bourses posted gains, including Shanghai, Seoul, Sydney, Taipei, Wellington, Jakarta, Manila, Singapore, and Kuala Lumpur.

Tokyo closed down nearly half a percent, influenced by a strengthening yen, which rose over 1.2 percent amid expectations regarding the Fed’s monetary policy.

The Hang Seng in Hong Kong and Seoul led regional gains, with the Hang Seng index closing more than 2.5 percent higher.

Meanwhile, Tokyo’s performance was impacted not only by the strengthening yen but also by the expiration of the right to claim dividends for many shares, contributing to a decline in the overall market.

On Wall Street, the Dow Jones Industrial Average set another all-time high, advancing 0.3 percent to close at 37,665.52. In Europe, main markets, including London, Frankfurt, and Paris, opened higher on Thursday.

Despite a slowdown in US inflation, which remains above the Fed’s long-term target of around two percent, analysts cautioned that consumer spending had not fully rebounded.

US retail sales during the crucial holiday shopping season showed a 3.1 percent year-on-year increase, a notable decline from the previous year’s 7.6 percent jump.

Investor Louis Navellier remarked, “This is a reflection of a more cautious consumer and less discounting from retailers due to better inventory management.”

He also highlighted the ongoing challenges of modest wage growth against the backdrop of falling inflation.

In the commodities market, gold continued its upward trend, reaching $2,088.44 per ounce before retracing. Oil markets remained concerned about the Israel-Hamas conflict escalating into a broader regional conflict and the continuous attacks on key Red Sea shipping lanes by Yemen’s Huthi rebels.

French shipping giant CMA-CGM resumed some transit through the waterway, following Maersk’s announcement of a return as a US-led naval coalition began policing the maritime route.

Oil prices stabilized around this news, with both WTI and Brent futures trading within a relatively narrow band.

However, German shipping company Hapag-Lloyd AG announced it would continue to avoid the Red Sea route, opting to route shipments via the Cape of Good Hope.

Key Figures Around 0800 GMT:

Hong Kong – Hang Seng Index: UP 2.5 percent at 17,043.53 (close)
Tokyo – Nikkei 225: DOWN 0.4 percent at 33,539.62 (close)
Shanghai – Composite: UP 1.4 percent at 2,954.70 (close)
New York – Dow: UP 0.3 percent at 37,656.52 (close)
London – FTSE 100: UP 0.4 percent at 7,724.95 (close)
Currency and Commodity Highlights:

Euro/dollar: UP at $1.1116 from $1.1109 on Wednesday
Dollar/yen: DOWN at 140.82 yen from 141.81 yen
Pound/dollar: UP at $1.2816 from $1.2801
Euro/pound: DOWN at 86.74 pence from 86.75 pence
West Texas Intermediate: DOWN 0.1 percent at $74.03 per barrel
Brent North Sea Crude: UP 0.01 percent at $79.66 per barrel