Asian Tech Stocks Surge, Push Global Markets to New Heights

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Asian equities surged, driven by a rally in major tech stocks that propelled global markets to new peaks ahead of the anticipated US inflation data set for release later Thursday. Equities in Japan, Australia, and China climbed after a robust session on Wall Street, and the Australian and New Zealand dollars, along with most Asian currencies, strengthened against the US dollar.

Taiwan Semiconductor Manufacturing Co. hit record highs after reporting its fastest sales growth since 2022, owing to its role as the exclusive supplier of advanced chips for Nvidia Corp. and Apple Inc. Other leading contributors to the rise in the regional stock indexes included Sony Group Corp., Tencent Holdings Ltd., and Korean chipmaker SK Hynix Inc., which saw its highest trading levels since 2000.

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The S&P 500 and Nasdaq 100 each gained over 1%, pushing global equities to new records, buoyed by tech giants like Nvidia and Apple. Apple’s announcement of a 10% increase in new device shipments following a turbulent 2023 further fueled the rally. The S&P 500 extended its winning streak to seven sessions, the longest since November.

“Markets remain remarkably calm despite the flood of data this week, including Fed Chair Powell’s testimony, CPI/PPI reports, and the beginning of earnings season,” remarked Mark Hackett at Nationwide.

The core Consumer Price Index (CPI), which excludes volatile food and energy costs, is expected to rise by 0.2% in June for the second consecutive month, marking the smallest back-to-back gains since August. This modest increase is considered manageable for Federal Reserve officials.

“June’s CPI report looks to be another ‘very good’ report that should boost the FOMC’s confidence about the inflation trajectory,” said Anna Wong at Bloomberg Economics. “That should set the stage for the Fed to start cutting rates in September.”

Market swaps are currently pricing in two federal rate cuts in 2024, with a significant probability of the first cut occurring in September.

In Asia, investors are monitoring the potential impacts of the China Securities Regulatory Commission’s decision to tighten regulations on short selling and high-frequency trading to prevent improper arbitrage and ensure market stability. Sentiment toward Chinese stocks has worsened ahead of the country’s Third Plenum next week.

Meanwhile, during a testimony before Congress, Federal Reserve Chair Jerome Powell stated that the Fed does not need inflation to drop below 2% before considering rate cuts and acknowledged that additional efforts are necessary. He noted a significant cooling in the labor market and cited progress to be made on balance-sheet runoff, while stating that commercial real estate currently poses no threat to financial stability.

“The key takeaway from his testimony is the Fed’s assessment of the balance of risks is shifting in ways that—if supported and sustained by incoming data—will deliver a rate cut in September,” said Krishna Guha at Evercore ISI.

Bank of England Chief Economist Huw Pill remarked that the timing of a rate cut remains an “open question,” leading traders to adjust their bets on an August reduction.

Elsewhere, the Bank of Korea kept its benchmark interest rate unchanged on Thursday as it seeks further evidence that inflation will continue to ease. Thursday’s economic reports in Asia include consumer confidence data in Thailand and a monetary policy decision in Malaysia. Additionally, money supply and new lending figures for China may be released soon.

Oil prices climbed for a second consecutive day due to signs of growing demand and a general risk-on sentiment across broader markets. Gold prices also rose for the third day in a row.

Key events this week include the US CPI, initial jobless claims, and speeches by Fed’s Raphael Bostic and Alberto Musalem on Thursday, China’s trade data on Friday, and the University of Michigan consumer sentiment and US PPI on Friday, along with earnings reports from Citigroup, JPMorgan, and Wells Fargo.

In the markets, S&P 500 futures remained steady as of early Tokyo time, while Nikkei 225 futures rose by 0.8%, Japan’s Topix increased by 0.9%, Australia’s S&P/ASX 200 went up by 0.9%, Hong Kong’s Hang Seng added 1.5%, and the Shanghai Composite climbed by 0.8%. In Europe, Euro Stoxx 50 futures rose by 0.2%, with Nasdaq 100 futures showing little movement.

The Bloomberg Dollar Spot Index, the euro, the Japanese yen, and the offshore yuan saw little change, while the Australian dollar increased by 0.2% to $0.6761. In the cryptocurrency market, Bitcoin remained steady at $57,449.77 and Ether fell by 0.7% to $3,073.56. In bonds, the yield on 10-year Treasuries stayed constant at 4.29%, Japan’s 10-year yield was unmoved at 1.080%, and Australia’s 10-year yield rose by three basis points to 4.37%. Finally, West Texas Intermediate crude rose by 0.7% to $82.71 per barrel, and spot gold increased by 0.3% to $2,379.50 per ounce.