Rosalind Evans
Asian stock markets witnessed an upward surge, influenced by the impressive rally on Wall Street due to favourable consumer confidence and job opening data.
The Nikkei 225 of Japan saw a 0.9% growth during the morning session, reaching 32,529.72. South Korea’s Kospi climbed 0.6% to touch 2,567.44. Meanwhile, Hong Kong’s Hang Seng ascended by 0.4% settling at 18,563.39, and the Shanghai Composite observed a subtle increase of less than 0.1%, tallying 3,137.72.
Following a report by the Australian Bureau of Statistics which detailed a 4.9% rise in the Consumer Price Index over the past year until July, Australia’s S&P/ASX 200 surged 1.4% to 7,310.60. This was notably lower than the anticipated 5.2%, marking its first dip below 5% since February of the previous year.
“Considering it’s still significantly higher than the RBA’s 2% to 3% objective, the central bank might sustain its cautious pause approach. However, this could indicate the conclusion of its tightening phase,” mentioned Yeap Jun Rong, a market expert at IG.
In the US, the S&P 500 witnessed a 1.5% leap, reaching 4,497.63 — its largest growth since early June. Additionally, the Dow Jones and the Nasdaq composite soared by 0.8% and 1.7%, settling at 34,852.67 and 13,943.76 respectively.
Tuesday’s rally largely owed its momentum to major tech stocks. Apple and Nvidia observed gains of 2.2% and 4.2%. Positive stock movements surpassed the negative ones with a 4:1 ratio on the NYSE. The bond market also experienced a decline, while Europe and Asia showcased positive market performance.
The recent surge can be attributed to investors reflecting upon consumer confidence and labour statistics. The Conference Board disclosed a decline in consumer confidence for August, a departure from predictions. Meanwhile, reports from Tuesday indicated a substantial reduction in job vacancies — the least since March 2021. A decrease in job resignations for two consecutive months indicates a mellowing labour market which might influence inflation.
A robust employment market serves as a safeguard against economic downturns, although it complicates the Fed’s endeavours to control inflation. Reduced job vacancies and resignations can alleviate the need to increase salaries, which the central bank would likely find favourable.
“In response to consumer and job data, both bond and stock markets rallied. This has led to reduced anticipation of a Fed rate hike in their upcoming September meeting,” commented Sam Millette, a strategist at Commonwealth Financial Network.
The Fed’s main interest rate has been climbing for over a year, reaching its peak in 2001, with the objective of curtailing inflation to 2%. The market predicts that the September meeting might also see steady rates.
A series of crucial economic updates are scheduled for the week, including a GDP update and the monthly employment report for August.
Post the consumer confidence and job data release, the yield on the 2-year Treasury took a downturn, dropping from about 5.03% to 4.90%. As of Monday, it was 5.05%. The 10-year yield also diminished to 4.12% from Monday’s 4.21%.
In the energy sector, U.S. crude rose to $81.47, an increase of 31 cents, while Brent crude reached $85.75, ascending by 26 cents.
In foreign exchange, the U.S. dollar appreciated to 146.21 Japanese yen from 145.87, while the euro depreciated to $1.0871 from $1.0881.
Amidst global financial turbulence, the rise in Asian shares backed by Wall Street’s performance offers a sliver of optimism for investors. As world economies grapple with the challenges posed by inflation and labour market dynamics, careful analysis of these trends becomes imperative. The market’s reaction to consumer confidence and job data highlights the intricate balance between macroeconomic factors and investor sentiment, pointing towards an unpredictable but watchful future for global investments.
