Asian markets shine after Wall Street’s record highs: U.S. inflation fuels hopes of Fed rate cuts

Indices

The main Asian indices are exhibiting strong performance, reflecting a continuation of bullish sentiment anchored by political developments, favorable economic data, and easing global trade tensions. The Nikkei 225 (^N225) is trading at 50512.32, having gained 2.45979 for the day, and setting a new year high of 50549.6. This performance indicates robust investor confidence, especially following the confirmation of Sanae Takaichi as Japan’s prime minister and the expectation of continued market-friendly policies. The Hang Seng Index (^HSI) stands at 26409.88, up 0.95458, with the technology and industrial sectors leading the advance. Both indices display flat short-term micro-trend signals, suggesting that while upward momentum remains intact, investors are awaiting further macroeconomic or policy cues before extending risk positions. This pause may indicate a prudent approach to risk, as the market digests new highs and prepares for potential volatility around forthcoming economic events.

Stocks

Stock-specific activity in the region continues to reflect sectoral rotation and heightened volatility. In Japan, top performers include technology and innovation-driven firms such as DeNA, which surged 6.3, and Renesas Electronics, up 4.5, highlighting investor appetite for growth themes. In China, Brilliance Technology Co. advanced 12.59, while Tansun Technology Co. gained 4.75, signaling strong sentiment in the tech sector. Conversely, electric vehicle manufacturers such as NIO Inc. (NIO/HK:9866), Geely Automobile (HK:0175), and BYD (HK:1211) have suffered declines between -5 and -9, reflecting pressure from price wars and regulatory scrutiny. In Hong Kong, technology giants like Tencent Holdings (0700.HK) and Midea Group (000333.SZ) have experienced moderate pullbacks, suggesting selective profit-taking amid broader market strength. This pattern underscores a preference for growth and technology sectors, balanced by caution in areas facing policy uncertainty.

Economic News

Recent macroeconomic data has been instrumental in shaping the positive tone across Asian markets. In China, GDP grew by 4.8 in Q3, with industrial output up 6.5 and retail sales advancing 3.0, reinforcing recovery narratives despite ongoing challenges in the property sector. In Japan, the Tankan index for large manufacturers improved to 14, signaling resilience among corporates even as the manufacturing PMI slipped to 48.5, highlighting sectoral headwinds. The positive economic data has supported the equity rally and sustained rotation into growth-oriented sectors.

Economic Events

Investors are closely watching several critical economic and political events. In Japan, the appointment of Sanae Takaichi as prime minister and anticipated pro-growth fiscal policies are fueling expectations for continued stimulus and market reforms. The Bank of Japan’s upcoming policy communications, including a scheduled speech by BoJ’s Noguchi and the publication of the BoJ Summary of Opinions, are expected to clarify the monetary stance. In China, the Communist Party’s leadership meeting and the upcoming Fourth Plenary Session of the 20th Central Committee are set to unveil future economic reforms and strategies for market stability. These events are likely to drive volatility and influence sector allocations as outcomes become clearer in the coming days.

Market Sentiment

Market sentiment across Asia remains bullish, supported by robust economic indicators, political stability, and continued pro-market policy expectations in both China and Japan. However, the prevailing flat micro-trend signals for major indices reflect a cautious "wait-and-see" approach as investors seek confirmation from upcoming policy releases and economic events. This mood is driving selective sectoral outperformance, particularly in technology and industrials, while defensiveness persists in sectors exposed to regulatory risks and global macro uncertainties. The undercurrent of caution suggests that while optimism prevails, traders are prepared to pivot strategies should new risks or policy surprises emerge.

Please note that the analysis is for informational purposes only and does not constitute financial advice. Users should conduct their own research.