Asian stocks extend post-Fed rally, China data offers some support

Investing.com-- Most Asian stocks rose sharply on Friday, extending recent gains following dovish signals from the Federal Reserve, while some positive economic readings from China also aided sentiment.

Technology-heavy indexes were by far the best performers for the day, as expectations of U.S. interest rate cuts in 2024 drove down Treasury yields. Hong Kong’s Hang Seng index was the biggest benefactor from this trade, up 3.5% on strength in heavyweight tech stocks.

Regional stocks also took positive cues from a strong overnight close on Wall Street, with U.S. stock benchmarks trading close to record highs tracking a dovish outlook from the Fed.

Chinese stocks up on positive data, massive liquidity injection

Broader Chinese markets also advanced, with the bluechip Shanghai Shenzhen CSI 300 index up 1%, while the Shanghai Composite added 0.6% after data showed Chinese industrial production grew more than expected in November.

Chinese stocks also saw a heavy degree of bargain buying, with the CSI 300 recovering from a near five-year low. Sentiment towards China was battered by a string of weak economic readings in recent months, as a post-COVID economic recovery failed to materialize.

Weak retail sales and fixed asset investment data pointed to continued weakness in some aspects of the Chinese economy.

But Beijing remained committed to its monetary stimulus efforts. The People’s Bank of China injected about 1.45 trillion yuan ($200 billion) into the economy through its medium-term lending facility on Friday.

The move also indicated that the PBOC planned to keep its loan prime rate unchanged at record lows next week.

Broader Asian markets advanced, extending gains from the prior session as the Fed said it was done raising interest rates will cut rates by a deeper margin in 2024. The move points to improving global liquidity levels, which are bound to draw more capital flows into risk-driven markets.

Markets are pricing in a 25 basis point cut by the Fed by as soon as March 2024.

Japan’s Nikkei 225 added 1.1%, with focus turning to a Bank of Japan meeting on Tuesday. The central bank is widely expected to maintain its ultra-dovish stance, presenting a positive outlook for local stocks.

Data on Friday showed Japanese manufacturing activity shrank more than expected in early-December, while service sector activity improved.

Australia’s ASX 200 added 1% on broad-based gains, while South Korea’s KOSPI benefited from the tech play, rising 0.9%.

Indian stocks sit at record highs

Futures for India’s Nifty 50 index pointed to a positive open, with the index set to extend gains after clearing record highs on Thursday.

The Nifty sat at a lifetime high of 21,182.70 points, having marked strong gains over the past two weeks amid increasing optimism over the Indian economy.

The country is the fastest-growing major economy- a development that has come under the ruling BJP party. The BJP clinched three key state election victories earlier this month, setting the party up for a strong general election in 2024.

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