Asia’s major stock indexes rallied on Wednesday, riding a tech-fuelled Wall Street wave and buoyed by rising optimism over a US interest rates turnaround.
An after-hours surge in shares of EV maker Tesla following its promise of new models, and upbeat earnings from some US companies, lifted sentiment, spurring a charge in tech stocks across the region, with Taiwan, South Korea and Japan’s Nikkei leading the way.
Tokyo’s benchmark average locked in a third consecutive day of gains, tracking New York higher to break above 38,000 points as investors continued to snap up tech-related shares and as a weak yen boosted exporters’ fortunes.
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The Nikkei finished up 2.42% at 38,460.08, closing past the 38,000-point mark for the first time in just over a week. The broader Topix closed 1.67% higher at 2710.73.
Japanese shares have had a bumpy month since the benchmark index rose to a record high of 41,087.75 at the end of March. It sank as low as 36,733.06 last week on factors such as geopolitical concerns and profit-taking.
However, sentiment has turned favourable on risk assets again as fears of a re-escalation in the Middle East eased and US stocks closed higher overnight following positive earnings from top-tier companies.
Toyota Motor, which rose 3.1%, and other export-related stocks performed strongly as the dollar traded around a 34-year high against the Japanese currency.
China stocks rose, tracking global peers as rate cuts hopes rose after data showed US business activity cooled in April.
China’s blue-chip CSI300 index was ahead 0.44% with, earlier in the session, its financial sector sub-index higher by 0.11%, the consumer staples sector down 0.2%, the real estate index down 0.52% and the healthcare sub-index down 0.75%.
The Shanghai Composite Index rose 0.76%, or 22.84 points, to 3,044.82, while the Shenzhen Composite Index on China’s second exchange was up 1.18%, or 19.78 points, to 1,694.82.
Chinese H-shares – stocks belonging to companies from the Chinese mainland – rose 1.8% to 6,061.79, while the Hang Seng Index was up 2.21%, or 372.34 points, to 17,201.27.
Meta, Alphabet, Microsoft Earnings
Elsewhere across the region, in earlier trade, Seoul was up more than 2%, while Taipei, Mumbai and Manila were higher too. Sydney, Singapore, Wellington and Jakarta were also well in the green.
MSCI’s broadest index of Asia-Pacific shares outside Japan was 1.6% higher, having climbed 1% on Tuesday, as stocks rebounded from last week’s steep selloff.
The risk-on rally was set to continue in Europe, with Eurostoxx 50 futures up 0.40%, German DAX futures up 0.33% and FTSE futures 0.60% higher.
Tesla kicked off the earnings season for US tech megacaps, announcing the launch of new electric vehicle models that sent its shares up 12.5% in extended trading. The gains came despite Tesla releasing first-quarter results that missed expectations.
US stocks closed higher as companies such as automaker General Motors reported strong earnings. E-mini futures for the S&P 500 rose 0.38%, while Nasdaq futures was 0.7% higher.
The earnings-packed week includes results from tech giants Meta Platforms, Alphabet and Microsoft, and will likely set the tone for the near term.
Beyond corporate earnings, traders are also focused on US gross domestic product figures and the March personal consumption expenditure data – the Fed’s preferred inflation measure – due later this week to gauge the path of US rates.
Markets are now pricing in September for the timing of the Federal Reserve’s first rate cut, with expectations of 42 basis points of cuts this year. At the start of the year, traders had priced in 150 bps of easing for the whole year.
Yen Intervention Bets
The drastic shift has elevated Treasury yields and lifted the dollar in the past few weeks but on Wednesday they were subdued following data that showed US business activity cooled in April to a four-month low due to weaker demand, while rates of inflation eased slightly even as input prices rose sharply.
The yield on 10-year Treasury notes was at 4.617% on Wednesday, having dipped to as low as 4.568% on Tuesday following the economic data.
The dollar index, which measures the US currency against six peers, eased 0.066% to 105.60 after a 0.424% drop on Tuesday.
The Japanese yen was last at 154.845 per dollar, just shy of the 34-year low of 154.88 it touched on Tuesday ahead of the Bank of Japan’s two-day policy meeting that concludes on Friday. The yen is down nearly 9% this year.
Japanese Finance Minister Shunichi Suzuki issued on Tuesday the strongest warning to date on the chances of intervention, saying last week’s meeting with US and South Korean counterparts had laid the groundwork for Tokyo to act against excessive yen moves.
Japan last intervened in the currency market in 2022, spending an estimated $60 billion to defend the yen.
Oil prices were mostly flat, with US crude at $83.43 per barrel and Brent at $88.47 as investor kept an eye on tensions in the Middle East.
Key figures
Tokyo – Nikkei 225 > UP 2.42% at 38,460.08 (close)
Hong Kong – Hang Seng Index > UP 2.21% at 17,201.27 (close)
Shanghai – Composite > UP 0.76% at 3,044.82 (close)
London – FTSE 100 > UP 0.43% at 8,079.54 (0849 BST)
New York – Dow > UP 0.69% at 38,503.69 (Tuesday close)
- Reuters with additional editing by Sean O’Meara
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