Asian shares advanced on Thursday, following the strong performance of Wall Street and the surge in Tokyo’s benchmark index. The yen’s weakness against the U.S. dollar has boosted export-related shares, contributing to a New Year rally.
Tokyo Stock Market Hits Highest Level Since 1990
In morning trading, Japan’s benchmark Nikkei 225 jumped 1.7%, reaching its highest level in over three decades. Several major Japanese companies saw significant gains: Toyota Motor Corp. stock rose more than 4%, Honda Motor Co. added 3%, Sony Group Corp. rose 3.5%, and Hitachi gained 4%. However, analysts predict that profit-taking may limit further increases in share prices.
Mixed Performances in Other Asian Markets
While Hong Kong’s Hang Seng index rose by 0.4%, China’s Shanghai Composite saw a slight decline of 0.4%. Australia’s S&P/ASX 200 recorded a gain of 0.4%, and South Korea’s Kospi showed a 0.3% increase.
South Korean Central Bank Maintains Monetary Policy
The South Korean central bank decided to keep its monetary policy unchanged amid inflation levels remaining above 3%. This decision reflects the confidence in the current growth conditions, particularly with the recovery in semiconductor exports.
Robert Carnell, regional head of research Asia-Pacific at ING, stated, “Growth conditions are holding up relatively well for now with the recent recovery in semiconductor exports.”
Wall Street Ends on Positive Note Ahead of Inflation Report
Wall Street closed higher on Wednesday as traders made their final moves ahead of the upcoming inflation report. The report may provide insight into whether the market’s recent excitement, propelling stocks to new records, is justified.
The S&P 500 rose by 0.6% to 4,783.45, just 0.3% below its all-time high. The Dow Jones Industrial Average added 0.5% to 37,695.73, while the Nasdaq composite climbed 0.8% to 14,969.65.
Price Increases Cool, Raising Hopes for Interest Rate Cut
Price increases in the US have shown some signs of cooling down since reaching their peak in the summer of 2022. This development has raised hopes among economists that the Federal Reserve may decide to cut interest rates significantly this year.
According to economists, the latest report is expected to reveal that prices paid by US consumers were 3.2% higher in December compared to the previous year. Although this would represent a slight increase from November’s inflation rate of 3.1%, economists believe that underlying inflation trends have likely continued to cool after excluding the volatile food and fuel prices.
The Federal Reserve has hinted at the possibility of cutting interest rates up to three times in the near future. However, there are critics who believe that the expectation for double the number of rate cuts is overly optimistic.
As the anticipation for rate cuts grows, the yield on the 10-year Treasury has already dropped significantly from its position above 5% in October. Although it did experience a slight increase on Wednesday, rising from 4.02% to 4.03%, it remains at a much lower level.
In Wednesday’s trading session, Wall Street experienced heavy losses, particularly in stocks of oil-and-gas companies. Exxon Mobil (XOM) saw a 1% dip, while Devon (DVN) dropped by 1.9%.
As for the energy market, the price of benchmark US crude (CLG24) increased by 23 cents to reach $71.60 a barrel early Thursday, after experiencing a decrease of 87 cents on Wednesday. Brent crude (BRNH24), which serves as the international standard, also saw a rise of 24 cents, reaching $77.04 a barrel.
In currency trading, the US dollar (USDJPY) slipped slightly against the Japanese yen, falling from 145.62 yen to 145.52 yen.