Hong Kong, SAR China – July 29, 2024 – Asian stocks staged a significant rally on Monday, driven by anticipation of the upcoming Federal Reserve meeting and potential interest rate cuts. The technology sector, which had been battered recently, emerged as a major driver of the gains.
Regional Markets Buoyed by Fed Expectations
Positive sentiment from Wall Street on Friday spilled over into Asia, with investors buoyed by signs of easing inflation in the US. This fueled hopes that the Fed might cut interest rates later this year, pushing US stock index futures higher in Asian trading.
While the Fed is expected to maintain current rates at its two-day meeting concluding on Wednesday, any hints regarding future rate cuts will be closely scrutinized, especially following recent dovish comments from Fed officials.
Tech Sector Extends Recovery
Tech-heavy bourses across Asia continued to lead the charge as the tech sector rebound gained momentum. Japan’s Nikkei 225 surged 2.2%, while South Korea’s KOSPI and Hong Kong’s Hang Seng both rose around 1%.
Bargain hunting fueled the tech rally after a two-week period of profit-taking. Additionally, the prospect of lower interest rates prompted investors to rotate into sectors more sensitive to economic cycles.
However, with crucial earnings reports due later this week, investors are starting to re-enter the sector. Tech giants like Microsoft (MSFT), Apple (AAPL), and Meta Platforms (META) are all slated to report their second-quarter earnings, offering further insights into the technology industry and the future of artificial intelligence.
China Lags Behind
Unlike its regional peers, China’s stock markets continued to struggle. Both the Shanghai Shenzhen CSI 300 and Shanghai Composite indexes slipped by 0.4% and 0.1%, respectively, hovering near five-month lows with negative sentiment towards China persisting.
Investor concerns about a slowing Chinese economic recovery, fueled by a string of weak economic data released throughout July, have triggered extended selling in Chinese markets. The uncertainty surrounding how the next US administration might handle relations with Beijing also weighs heavily on sentiment.
This week’s focus will shift to purchasing managers’ index data from China for the month of July, which could offer further clues about the nation’s business activity.
Despite China’s sluggish performance, broader Asian markets displayed positive momentum. Australia’s ASX 200 rose by 0.8%, while Japan’s TOPIX index climbed 1.9%. Futures for India’s Nifty 50 index also point to a positive opening, potentially extending last week’s record highs.
