© Reuters.
Investing.com – Most Asian stocks rose sharply on Thursday, tracking an overnight rally on Wall Street as weaker-than-expected US inflation data fueled bets on a less hawkish Federal Reserve this year.
The gains were heavily biased towards the technology sector, given that it has been most under pressure from rising borrowing costs over the past year. The prospect of a less aggressive Fed also improves the outlook for future earnings from technology stocks.
Evidence of an easing of Chinese regulatory pressure on the country’s tech giants also helped support sentiment, as did speculation about more stimulus measures from Beijing.
Hong Kong stocks lead gains on rising technology and stimulus hopes
Hong Kong was the best performer of the day, up 2.4% as tech-heavy stocks extended their rally after a US inflation reading.
Majors such as Baidu Inc (HK:) (NASDAQ:), Ali Baba Group (HK:) (NYSE:) and Tencent Holdings Ltd (HK:) – a trio of BAT (LON:) as well as others including JD.com (HK:) (NASDAQ:) and Bilibili Inc (HK:) (NASDAQ::) rose between 2.7% and 7.5%, up for the fourth straight session.
Shares were boosted by bets that China was in the process of ending its regulatory campaign against the country’s largest internet companies, after Beijing imposed heavy fines on Tencent and Ant Alibaba Group. Government officials noted that the fines represent a clearer regulatory path forward for local technology companies, and have also opened up prospects for renewed dialogue with the sector.
Gains in Chinese tech extended to other countries, with South Korea rising 1%, while the index added 1.4%. The Kospi index was also boosted by keeping interest rates steady for the fourth month in a row.
The two indices in China rose 1.1% and 0.8%, respectively, as state media reported that the government is considering more stimulus measures in the coming months. The reports come after a series of weaker-than-expected economic readings raised concerns about a slowing recovery in Asia’s largest economy.
Australia rose 1.5%, while Japan rose 1.2%, snapping seven sessions of weakness. Singapore-traded India index futures indicated a flat open, after Nifty fell from record highs on Wednesday.
US consumer price index fell, focus on rate hikes by the Fed
While the US inflation rate x (CPI) is weaker than expected for June, which ignores volatile food and fuel prices, it remains stubbornly high.
This reinforced expectations that the Fed will continue to raise interest rates in the near term, with the bank widely expected to raise interest rates later in July.
Fed officials also warned this week that viscous core inflation will require further monetary tightening.
But with recent data also pointing to cooling in the labor market, investors have been speculating about how many rate hikes the Fed will be required. Any signs of a less hawkish Fed will likely lead to further gains in stock markets.