Asian stocks trade higher on Fed rate hopes

December 28, 2023 | 15:15
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Asian stocks were largely higher on Thursday, with Hong Kong leading the gains as investors worked on expectations the US Federal Reserve will cut rates next year.

Global markets have been on the front foot since the Fed's most recent meeting, when it signalled its rate-hike cycle could be nearing an end as global inflation slows.

Asian stocks trade higher on Fed rate hopes
Asian stocks trade higher on Fed rate hopes, illustration photo/ Source:

Other than Japan, most Asian bourses were in positive territory on Thursday, with Shanghai, Seoul, Sydney, Taipei, Wellington, Jakarta, Manila, Singapore and Kuala Lumpur all rising.

Tokyo closed down almost half a percent, weighed by a strengthening yen, with the currency buoyed by expectations around the Fed's monetary policy and gaining more than 1.3 percent.

The Japanese exchanges' performance was also hemmed by the fact that the right to claim dividends for many shares has now expired, driving down the overall market.

Hong Kong and Seoul led regional gains across Asia, with the Hang Seng rising more than 2.5 percent in ongoing trading.

On Wednesday, the Dow Jones Industrial Average led gains on Wall Street, advancing 0.3 percent to finish at another all-time high of 37,665.52.

US indices returned to work on Tuesday, but European markets were only back on Wednesday, with London leading the way as it closed 0.4 percent higher.

While US inflation has slowed, it remains above the Fed's long-term target of around two percent, and analysts warned that consumer spending had still not bounced back to healthy levels.

US retail sales over the key holiday shopping season were up 3.1 percent year-on-year, according to the Mastercard SpendingPulse survey, but that was markedly down from the previous year's 7.6 percent jump.

"This is a reflection of a more cautious consumer and less discounting from retailers due to better inventory management," said investor Louis Navellier in a note.

"While inflation is falling, the runup from last year's high rate has still squeezed budgets against a modest wage growth closer to four percent."

Oil markets continue to fret over the threat of the Israel-Hamas war spilling out into an all-out regional conflict and the ongoing attacks on key Red Sea shipping lanes by Yemen's Huthi rebels.

On Wednesday, French shipping giant CMA-CGM resumed some transit through the waterway, days after Danish group Maersk announced it would return as a US-led naval coalition is now policing the maritime route.

On Thursday, oil prices stabilised around that news, with both WTI and Brent futures trading within a relatively narrow band.

The news on the shipping front was not all rosy, however, with German giant Hapag-Lloyd AG, saying it would continue to avoid the Red Sea route and would route shipments via the Cape of Good Hope.

- Key figures around 0730 GMT -

Hong Kong - Hang Seng Index: UP 2.5 percent at 17,048.48

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)

Euro/dollar: UP at $1.1120 from $1.1109 on Wednesday

Dollar/yen: DOWN at 140.75 yen from 141.81 yen

Pound/dollar: UP at $1.2819 from $1.2801

Euro/pound: DOWN at 86.74 pence from 86.75 pence

West Texas Intermediate: UP 0.1 percent at $74.20 per barrel

Brent North Sea crude: UP 0.3 percent at $79.89 per barrel


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