Stock Market

Asian stocks rally as markets bet on Fed rate peak, Chinese stimulus

In a promising turn of events, Asian stocks experienced a significant surge on Tuesday as investors speculated that the Federal Reserve was nearing the conclusion of its rate hike cycle for the year. Adding to the positive sentiment, hopes for additional stimulus measures from China further bolstered the market.

The comments made by several Fed officials throughout the week hinted that while the central bank still plans to raise rates in the coming months, there might be limited room for further increases. This sentiment was reinforced by weak labor market data, which supported the notion of a potential slowdown in rate hikes.

A series of discouraging economic indicators from China has led to increased speculation that Beijing will implement additional measures to stimulate its slowing economic recovery. The recent inflation data revealed that consumer spending was teetering on the edge of deflation, sending negative signals about the prospects of Asia’s largest economy.

The technology sector emerged as the top performer in Asian markets, driven by the hope of a pause in the Fed’s rate hikes and a more lenient regulatory environment for Chinese internet giants. Hong Kong’s Hang Seng index experienced a notable 1.6% rally, propelled by the strong performance of industry heavyweights such as Baidu Inc (HK:9888) (NASDAQ:BIDU), Alibaba Group (HK:9988) (NYSE:BABA), and Tencent Holdings Ltd (HK:0700). These three companies witnessed gains ranging from 1.7% to 2.5%, building upon their previous session’s upward momentum.

Apart from the potential Fed pause, Asian technology stocks received an additional boost as Chinese regulators appeared to ease their scrutiny of the country’s major internet firms. Despite imposing record fines on Alibaba’s Ant Group and Tencent last week, Beijing’s actions were interpreted by investors as a signal that the regulatory crusade against technology giants had come to an end.

Other technology-focused exchanges also experienced significant gains, with South Korea’s KOSPI and Taiwan’s Weighted index rising by 1.4% and 1.2% respectively.

Japan’s Nikkei 225 index climbed by 0.3%, while the broader TOPIX added a modest 0.1% gain to its value.

The Chinese real estate sector observed a surge in stock prices following the announcement that the People’s Bank of China plans to provide policy support for the industry until the end of 2024. This move helped alleviate concerns about slowing growth in China and generated optimism about potential stimulus measures from Beijing, particularly in light of an upcoming high-level government meeting scheduled for later in July.

Positive sentiment surrounding China’s prospects contributed to a 1.2% surge in Australia’s ASX 200 index. Additionally, consumer sentiment data indicated signs of a recovery in the country.

However, China’s Shanghai Shenzhen CSI 300 and Shanghai Composite indexes slightly lagged behind their counterparts, experiencing a 0.5% and 0.4% increase, respectively. Investors remained cautious about direct investments in Chinese stocks due to uncertainty surrounding the country’s economic outlook.

On the whole, Asian markets displayed upward momentum on Tuesday. Futures for India’s Nifty 50 index pointed towards a positive start for local stocks, with major indexes in India hovering around record highs.

As attention now turns to key U.S. consumer inflation data set to be released on Wednesday, along with a series of speeches from Fed officials throughout the week, market participants eagerly anticipate further insights into the global economic landscape.

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