MSCI’s broadest index of Asia-Pacific shares outside Japan jumped 0.7%, after ending July mostly flat
Asian shares rallied on Thursday, tracking a big revival in tech stocks helped by Meta and Nvidia, while prospects of imminent policy easing in the US boosted global bonds and commodities.
The Fed held interest rates steady overnight but opened the door to a cut in September. That had traders wagering that the Bank of England might cut later in the day, with the probability of a move at 60%.
European futures are also set for a higher open, with EUROSTOXX 50 futures 0.2% higher and FTSE futures adding 0.3%. Nasdaq futures advanced 0.9% as shares of Facebook-parent Meta Platforms soared 7% after the bell on strong earnings.
The Japanese yen rallied to 148.48 per dollar before running into resistance.
It was 0.2% higher at 149.77, having soared 1.8% overnight after the Bank of Japan raised interest rates for the second time in 17 years and hinted more tightening to come.
MSCI’s broadest index of Asia-Pacific shares outside Japan jumped 0.7%, after ending July mostly flat. A regional MSCI IT index climbed 2.0% and Taiwan’s shares soared 1.8%.
Japan’s Nikkei, however, declined 2.7% as the sharp jump in the yen clouded the outlook for exporters.
Chinese blue chips declined 0.3% after a private survey showed China’s manufacturing sector unexpectedly tumbled in July, boding ill for economic growth momentum.
On Wall Street, tech stocks are making an extraordinary comeback after the recent sell-off. AI company Nvidia rallied 13%, gaining nearly $330 billion in stock market value on Wednesday.
Tech companies Apple and Amazon.com will report their earnings later on Thursday.
Also helping the global risk rally is dovish comments from Fed Chair Jerome Powell that policymakers had a “real discussion” about cutting at the July meeting. The central bank also said the risks to employment were now on a par with those of rising prices.
As a result markets, which have already bet on a September cut, are wagering on a 10% probability that the Federal Reserve may go for a 50 bps easing in September. For all of 2024, they have priced in a total easing of 72 bps.
We’ve got this September cut more than fully priced in which is frankly ridiculous because there is no way they are going to start off with 50, said Rob Carnell, ING’s regional head of research for Asia Pacific.
The market has got a bit ahead of itself. With three almost fully priced by the year end, it feels like two appears about right, he added.
Treasuries held onto most of their overnight gains. The yield on 10-year Treasuries gained 3 bps to 4.06%, having declined 11 bps overnight to the lowest since March.
