Most Asian stocks rose on Thursday amid growing optimism about lower U.S. interest rates, but overall gains were limited as a downward revision to payrolls data rattled markets.
Japanese stocks posted their best performance on record on the day as purchasing managers’ index data showed sustained growth in the country’s services sector. But Chinese markets lagged, while gains in most other Asian markets were limited.
Regional markets received a somewhat positive boost from Wall Street, as anticipation of the Federal Reserve meeting in late July showed more policymakers supporting interest rate cuts – more bets on a cut in September.
U.S. stock index futures were steady in Asian trading, but optimism about interest rate cuts was dampened by data showing a sharp downward revision in U.S. jobs data in the year to March 2024, raising concerns that a slowing labor market could trigger a possible recession in the world’s largest economy.
This week’s focus is squarely on the speech to be delivered at the Jackson Hole Symposium on Friday.
Japanese stocks rise on positive services PMI
Japanese and Asian stock indices performed the best in Asia, rising 0.8% and 0.4% respectively.
Sentiment towards Japan was boosted by PMI data showing strong growth for the second straight month, with domestic demand boosted by improving wages.
While Japan’s economy contracted more than expected, overall business activity remained expanding.
The strength of the Japanese economy is increasing the chances of a rate hike by the Bank of Japan this year, which could create some headwinds for local markets. But stocks that are sensitive to domestic demand are expected to benefit from this trend.
The US jobs report, due out on Friday, is expected to provide further clues about the economy.
China lags behind, broader Asian markets less buoyant
Broader Asian markets posted much smaller gains, as renewed concerns about a U.S. recession dampened optimism about interest rate cuts.
Chinese and U.S. stock indexes fell 0.3% and 0.1% respectively, with sentiment toward the country showing no signs of improving. Both indexes hit six-month lows.
A rebound in technology and e-commerce heavyweights helped Hong Kong’s index rise 0.6%, although the index was suffering from sharp losses from the previous session.
South Korea’s consumer price index steadied after it kept interest rates unchanged as expected, pointing to the need to keep inflation under control, even as chances of an eventual rate cut grow amid sagging economic conditions.
Australian shares rose 0.2%, while Indian stock index futures pointed to a somewhat negative open, with the index facing resistance near the 25,000 level.