Asian stocks rose on Thursday, tracking gains on Wall Street overnight, as a string of weak economic readings prompted investors to ramp up bets that the Federal Reserve will cut interest rates by September.
Japanese stocks have been the best performers in recent sessions, recovering most of the losses they suffered during the second quarter and returning to record highs.
Regional markets tracked overnight strength on Wall Street, where U.S. interest rates and bond yields hit record highs in holiday-shortened trading, after weak and rising bets on a 25 basis point rate cut in September.
But expectations of the Fed’s June meeting have somewhat tempered that optimism, with U.S. stock futures trading sideways in Asian trade. Ahead of Friday’s key data, sentiment is also cautious.
Japan’s Nikkei, Topix test record highs
Japanese and US stock indexes rose 0.2% and 0.5%, respectively, on Thursday.
The Nikkei had broken through the 40,000 mark for the first time since April earlier this week, and was close to its record highs hit during the first quarter.
The broader Topix index briefly hit a record high of 2,890.47.
Japanese markets rose over the past week as the yen was hit by a series of weak economic readings, prompting bets to rise that the Bank of Japan will have only limited room to tighten monetary policy.
Investors have largely ignored the potential headwinds that could weigh on corporate earnings as Japan’s economic growth slows. Earlier this week, the government downgraded first-quarter gross domestic product data to show a much deeper contraction in growth than initially expected.
Japanese markets also gained, helped by technology stocks, which followed their U.S. counterparts on the hype around artificial intelligence.
Asian stocks rise on September rate cut bets
Asian markets rose broadly amid growing conviction that the Federal Reserve will start cutting interest rates in September. Data showed traders now see a 66% chance of a 25 basis point rate cut, up from a previous estimate of 59.5% yesterday.
Retail sales in South Korea rose 0.7%, while those in Australia rose 1.1%. Data from Australia showed that retail sales in the country fell more than expected in May.
India index futures pointed to a positive open, with the Nifty and Nifty hitting record highs this week.
China lags behind as economic tensions persist
Chinese stocks lagged their peers, falling slightly as concerns persist over a slowdown in the economic recovery. Losses in mainland shares also dragged the Hong Kong index down slightly.
Sentiment towards China showed little sign of improvement, after private PMI data showed weaker-than-expected growth in .
Beijing’s slowdown in stimulus measures has raised doubts about the extent of the supportive measures the government plans to take.
All eyes now turn to the third session of the Chinese Communist Party — a meeting of senior officials that is expected to provide further signals about the Chinese economy.