Tokyo, Japan – Asian stocks rose on Tuesday as optimism regarding a potential decline in U.S. interest rates continued to drive market sentiment. The Nikkei and KOSPI indexes in Japan and South Korea led the gains, outperforming their counterparts in catch-up trade after a long weekend.
Investors were encouraged by strong first-quarter earnings in the technology sector on Wall Street, which set a positive tone for regional markets. However, U.S. stock index futures dipped slightly in Asian trade, and overall gains in the region were tempered by anticipation for more cues on U.S. rates from Federal Reserve officials scheduled to speak later in the week.
Japan’s Nikkei surged by 1.2% while South Korea’s KOSPI jumped by 1.9% on Tuesday. The momentum for these indexes was largely driven by softer-than-expected U.S. data from Friday, with technology stocks providing significant support.
The positive gains in Asian markets were also bolstered by Friday’s data on payrolls, which led traders to once again factor in potential interest rate cuts by the Federal Reserve. Market participants now anticipate a 25 basis points rate cut in September as a result of the data.
Despite the overall optimism, gains in other Asian markets were more subdued as Fed officials cautioned that while rate cuts were on the horizon, the central bank needed further evidence that inflation was trending downward. More insights from Fed speakers are awaited this week, providing further guidance for investors.
In Australia, the ASX 200 index rose by 1.2% as the Reserve Bank of Australia struck a less hawkish tone than expected, reducing speculations of further rate hikes in the near future. The central bank’s cautious approach came after weaker-than-expected first-quarter data on inflation and domestic spending, which suggested a more tempered outlook for the Australian economy.
Broader Asian markets experienced limited movement on Tuesday, with Chinese shares showing signs of plateauing after reaching five-month highs in April. Hong Kong’s index, which had recently entered a bull market, fell by 0.4% following 10 consecutive sessions of gains. Meanwhile, futures for India’s index hinted at a flat open after minor losses in the previous session.
Overall, Asian markets displayed a mixed picture, with varying levels of optimism and caution as investors monitored developments on U.S. interest rates and global economic indicators.