Rosalind Evans
Following Wall Street’s significant rally, marking its best day since June as bond market tensions somewhat eased, most Asian stocks experienced a rise on Thursday.
The Nikkei 225 in Japan increased by 0.4% during morning trades, reaching 32,146.33. Australia’s S&P/ASX 200 also went up by 0.4% to 7,178.10. The Kospi in South Korea leaped by 1.0% to stand at 2,531.45. Hong Kong’s Hang Seng index experienced a 1.1% boost to 18,041.53. Conversely, the Shanghai Composite slightly dipped by 0.1% to 3,074.78.
Market observers are keenly awaiting a speech by U.S. Federal Reserve Chair Jerome Powell, set to happen later today at an event in Jackson Hole, Wyoming. Historically, this event has witnessed significant policy announcements from the Fed.
With recent stronger-than-anticipated economic reports, the optimism among traders regarding the Fed’s potential rate cuts in the upcoming year has been waning. They had hoped that rate hikes had concluded for this cycle.
Stephen Innes of SPI Asset Management commented on the promising outlook for Asian stocks, attributing it to the positive trends in the U.S. markets.
In the U.S., the S&P 500 saw a 1.1% rise, somewhat mitigating its losses in what has been a challenging August. The Dow Jones advanced by 184 points (0.5%), while the Nasdaq surged by 1.6%. Stocks that thrive with lenient interest rates, especially big tech stocks, took the lead. This surge was fueled by data suggesting a potential cool-down in the U.S. economy, which caused the 10-year Treasury yield to retract from its peak since 2007.
Two major drivers of the S&P 500’s increase were Apple with a 2.2% rise and Microsoft with a 1.4% surge. Nvidia, a pivotal market player, rose 3.2% ahead of its earnings report, which later exceeded expectations. Their revenue for the recent quarter more than doubled from the previous year, reaching $13.51 billion. This was complemented by a promising revenue forecast for the subsequent quarter. Consequently, Nvidia’s stock appreciated in after-market trades.
The rise in Nvidia and a few other significant companies contributed significantly to the S&P 500’s earlier gains this year. Many of these leading stocks also rode the AI wave.
Recently, these stocks have faced challenges as bond yields rise. Higher bond interests make investors less inclined to invest heavily in volatile stocks.
Wednesday witnessed a decrease in the 10-year Treasury yield to 4.18% from Tuesday’s 4.33%. There was a noted decrease in the output of U.S. services and manufacturing sectors, pushing products down. However, the data still hinted at growth, albeit at a reduced rate due to inflation and surging interest rates.
Chris Williamson of S&P Global Market Intelligence expressed concerns over the recent slow business activity, questioning U.S. economic growth prospects for Q3.
Elevated rates generally dampen the overall economy and investment values. Though inflation has eased from last year’s peak of over 9%, consistent job market performance and household spending in the U.S. might pose challenges to reaching the Fed’s 2% inflation target.
To sum it up, the S&P 500 advanced by 48.46 points to 4,436.01, the Dow increased by 184.15 to 34,472.98, and the Nasdaq rose by 215.16 to 13,721.03.
In terms of energy, the U.S. crude benchmark declined by 33 cents, pricing at $78.56 a barrel, while Brent crude dropped by 28 cents to $82.93 a barrel.
Regarding currency, the U.S. dollar slightly appreciated against the Japanese yen to 145 from 144.79. The euro remained relatively steady at $1.0864, only marginally different from $1.0865.
In light of recent economic shifts, global markets remain in a state of flux, balancing between the optimism of the past and the uncertainties of the future. Asian and U.S. markets, driven by key players such as Nvidia and their groundbreaking AI developments, continue to make headlines. As investors and stakeholders closely watch, the intricate dance between bond yields, inflation rates, and stock market performance unfolds, setting the stage for the next chapter of global financial history.
