Asian stocks went up on Tuesday because investors thought that a weakening U.S. economy would make the Fed less “hawkish,” and the partial withdrawal of the UK’s controversial tax plan also helped.
The Nikkei 225 index in Japan went up 2.8%, and both the Taiwan Weighted Index and the KOSPI index in South Korea went up more than 2%. Technology stocks that depend on yields did very well.
The best performer of the day was Australia’s ASX 200 index, which went up by almost 4% after the Reserve Bank raised rates by less than expected. The bank made it clear that it will keep raising interest rates, but it will also try to find a balance between tightening policy and making sure that economic growth stays steady.
The move by the RBA also caused the Australian dollar to drop, which helped export-heavy industries like mining and consumer goods. The stocks of Australian banks also went up because there was a chance that lending rates would go up.
A week-long holiday in China and Hong Kong cut down on trading in Asia. But the markets took Wall Street’s strong rise overnight as a good sign.
Weak data from the U.S. manufacturing and construction industries gave people hope that the Fed would slow the rate of interest rate hikes more quickly than it had said it would. But a number of Fed officials have said that in order to fight inflation, the central bank is willing to risk hurting the economy.
Still, the dollar fell for the fourth day in a row, and 10-year Treasury yields fell from a 12-year high, which made risk-driven assets less vulnerable.
The mood also got better when the UK took back some parts of a controversial tax plan that had caused a lot of people to worry about Britain’s financial health. The pound has also gotten stronger since hitting a record low last month.
But even though Asian stocks went up on Tuesday, they were still trading near their lows for the year. This year, worries about a hawkish Fed and slowing economic growth have been a big factor.
