Asian share markets showed positive momentum on Tuesday, buoyed by a significant rally in U.S. stocks driven by increasing optimism regarding a potential interest rate cut by the Federal Reserve. The prospect of lower rates has sparked investor enthusiasm, although U.S. futures indicated a slight decline, and oil prices also dropped.
Market Reactions Across Asia
Japan’s Nikkei 225 index remained nearly unchanged, closing at 48,628.85 after returning from a holiday. The index faced pressure as shares of SoftBank, a prominent technology investor, plummeted by 10.3%. Concerns arose over the company’s investments in OpenAI, particularly with the recent launch of Google’s next-generation Gemini artificial intelligence model, which could impact SoftBank’s returns.
In South Korea, the Kospi index increased by 0.3% to 3,859.12, while Taiwan’s Taiex surged by 1.5%. Chinese markets also experienced gains, with Hong Kong’s Hang Seng climbing 0.4% to 25,821.47 and the Shanghai Composite rising 0.9% to 3,872.45. Notably, shares of Alibaba increased by 1.6% ahead of its earnings report scheduled for later on Tuesday.
Australia’s S&P/ASX index saw a modest recovery, edging up 0.1% to close at 8,537.00.
U.S. Market Dynamics and Economic Indicators
U.S. markets experienced a notable surge on Monday, marking the beginning of a shortened trading week due to the upcoming Thanksgiving holiday. The S&P 500 rose by 1.5% to 6,705.12, one of its most substantial gains since summer. The Dow Jones Industrial Average increased by 0.4% to 46,448.27, while the Nasdaq Composite surged by 2.7% to 22,872.01.
The rally was largely attributed to renewed investor confidence that the Federal Reserve may lower its main interest rate at its next meeting in December. This anticipated move could stimulate economic growth and elevate investment prices. The market also benefited from robust performance among stocks related to the artificial intelligence sector. Notably, Alphabet saw its shares increase by 6.3%, contributing significantly to the S&P 500’s rise, while Nvidia added 2.1% to its value.
Despite recent volatility, the S&P 500 remains approximately 2.7% below its record high set in October. Investors are poised for additional challenges this week, particularly with the U.S. government set to release wholesale inflation data for September. Economists project a 2.6% rise in prices from the previous year, similar to August’s figures. A higher-than-expected inflation reading could deter the Fed from implementing a rate cut, as maintaining lower rates may exacerbate inflation concerns.
Although some Federal Reserve officials have expressed reservations about a December rate cut, citing persistent inflation above the 2% target, traders are currently pricing in a nearly 85% chance of a cut next month. This figure has increased from 71% on Friday and reflects a shift from a less than even chance seen just a week prior, according to data from CME Group.
In other financial developments, U.S. benchmark crude oil prices fell by $0.25 to $58.59 per barrel, while Brent crude decreased by $0.30 to $62.42 per barrel. The dollar also weakened, trading at 156.70 Japanese yen, down from 156.91 yen. The euro slipped to $1.1517 from $1.1521, and Bitcoin fell by 1.1% to $88,100, having previously been valued near $125,000 last month.
