Asian stocks surge as Fed keeps rate cut hopes alive; Nikkei at record high

Investing.com-- Most Asian stocks rallied on Thursday, with Japan’s Nikkei 225 hitting a record high after the Federal Reserve kept interest rates steady and said it was still considering at least three rate cuts in 2024.

Regional markets were dealt a strong lead-in from Wall Street, with U.S. benchmark indexes ending at record highs on Wednesday after the Fed meeting. U.S. stock futures also rose in Asian trade. 

The Fed kept rates steady on Wednesday, with Chair Jerome Powell stating that inflation still remained on path towards the Fed's 2% annual target. Fed officials also maintained forecasts for a total of 75 basis point reduction in rates this year.

Traders were now pricing in an over 70% chance the Fed will kick off its rate hike cycle by as soon as June, according to the CME Fedwatch tool. 

Japan’s Nikkei at record high, brushes off BOJ rate hike 

The Nikkei 225 index was among the best performers in Asia on Thursday, rising as much as 2.2% to a record high of 40,802 points. The broader TOPIX also surged 1.6% and hit an intraday record high.

Gains were broad-based, as sentiment towards Japanese stocks was also boosted by dovish signals from the Bank of Japan.

While the central bank hiked interest rates for the first time in 17 years and ended its yield curve control program, Governor Kazuo Ueda said that monetary conditions will remain largely accommodative in the near-term, citing uncertainty over the Japanese economy.

This scenario is expected to provide sustained support for Japanese equities in the near-term. But analysts warned that the Nikkei could turn rangebound after hitting 41,000 points, especially if the Japanese economy improves and monetary policy tightens further this year. 

Asian tech surges as AI hype persists 

Asian technology stocks resumed a recent rally amid resurgent hype over artificial intelligence, especially after market darling Nvidia (NASDAQ:NVDA) unveiled a new line of AI chips this week.

Tech-heavy bourses, such as South Korea’s KOSPI and Hong Kong’s Hang Seng index, rose 2.1% and 1.7%, respectively, tracking overnight, outsized gains on the NASDAQ Composite. 

The Hang Seng in particular was boosted by Tencent Holdings Ltd (HK:0700), with the internet giant rising 1.4% on strong quarterly earnings. Ecommerce stocks including Alibaba (HK:9988) and JD.com (HK:9618) rose tracking strong earnings from Temu owner PDD Holdings (NASDAQ:PDD). 

Most broader Asian markets also rose. Australia’s ASX 200 jumped 0.9% and was in spitting distance of a record high, even as signs of resilience in the country’s job market presented a higher-for-longer outlook for interest rates. 

Futures for India’s Nifty 50 index pointed to a positive open, with local heavyweight tech stocks likely to track their global peers. 

Chinese stocks lag, PMIs awaited 

On the other hand, China’s Shanghai Shenzhen CSI 300 and Shanghai Composite indexes lagged their peers, losing about 0.1% each. A rebound rally in Chinese markets now appeared to have run out of steam, amid a dearth of positive cues from the economy. 

Focus was now on a string of key purchasing managers index readings from China for more cues on Asia’s largest economy. PMI readings so far in 2024 have largely underwhelmed.