Most Asian indexes rallied on Thursday as rising expectations of a September rate cut by the US Federal Reserve lifted investor sentiment.
Markets started on the front foot, on the back of overnight gains on Wall Street, with the S&P 500 closing at a record high.
Shares across Asia were further boosted by advances in the euro ahead of the European Central Bank policy meeting, where a rate cut is widely expected.
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MSCI’s broadest index of Asia-Pacific shares outside Japan was 1.01% higher, led by tech stocks. The index was on course for a more than 2% gain in the week and snap its two-week losing streak.
Japan’s Nikkei rose 0.55% as Tokyo Electron and other chip-related stocks tracked their US peers higher. US chip stocks leapt 4.5% overnight, buoyed by gains to Nvidia, which overtook Apple to become the world’s second-most valuable company and saw its market cap hit the $3 trillion-mark for the first time
The Nikkei rose as much as 1.35% to cross the 39,000 level earlier in the session, but pared gains amid caution ahead of global central bank meetings.
“Investors sold stocks as soon as the index crossed a milestone,” said Shuutarou Yasuda, a market analyst at Tokai Tokyo Intelligence Laboratory, referring to the 39,000 level.
“Until the market confirms policy path of central banks in the US, Europe and Japan, it will be hard to make active bets on stocks.”
Chip-making equipment maker Tokyo Electron gave the biggest boost to the Nikkei, jumping 3.46%. Chip-testing equipment maker Advantest also jumped 3.91%.
The broader Topix rose 0.33% to 2,757,23.
China stocks lag
Stocks in China, meanwhile, lagged broader Asian peers. China’s blue-chip CSI300 index pared early gains to close 0.07% lower while the Shanghai Composite index was down 0.54%.
A post-lunch slump weighed on markets on the mainland even as a private sector survey released on Wednesday showed China’s services activity in May accelerated at the quickest pace in 10 months. Staffing levels expanded for the first time since January, pointing to a sustained recovery in the second quarter.
Meanwhile, Hong Kong shares closed marginally up, tracking Asian peers. The Hang Seng Index was up 51 points or 0.3% at 18,476 at close.
Elsewhere in Asia, Taipei, Manila Singapore and Jakarta closed in the green, while Bangkok edged down. Markets in Korea were closed for Memorial Day or Hyeonchungi.
Indian stocks, meanwhile, had a choppy session, but closed nearly 1% up after a turbulent week, as Prime Minister Narendra Modi was formally named to lead a new coalition government for a third straight term.
The Indian rupee weakened, however, despite broad gains in Asian currencies. The rupee was at 83.49 against the US dollar as of 1230 GMT, down from its close at 83.37 in the previous session.
ECB, US payroll report in focus
The ECB is all but certain to cut interest rates from record highs on Thursday and is likely to acknowledge it has made progress in its battle against inflation, but also stress that the fight is not yet over.
Investor focus will be on comments and the economic projection to gauge what comes after the expected rate cut. Markets are pricing in 64 basis points of cuts this year.
Focus will also be on the nonfarm US payroll report for May due on Friday, with a Reuters poll of economists expecting it to increase by 185,000 jobs.
Last month, improved US consumer confidence and a positive labour market outlook led investors to scale back expectations for US rate cuts.
That led to a second month of foreign outflows from emerging Asian equity markets, data from stock exchanges showed on Thursday.
Overseas investors withdrew a net $3.58 billion out of regional equities in India, Indonesia, Vietnam, Thailand, South Korea, the Philippines, and Taiwan in May, following $4.92 billion worth of net selling in April.
- Reuters, with additional editing by Vishakha Saxena
Key figures:
Tokyo – Nikkei 225 > UP 0.55% at 38,703.51 (close)
Hong Kong – Hang Seng Index > UP 0.28% at 18,476.80 (close)
Shanghai – Composite < DOWN 0.54% at 3,048.79 (close)
London – FTSE 100 > UP 0.27% at 8,269.45 (1245 GMT)
New York – Dow > UP 0.25% at 38,807.33 (Wednesday close)
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