FX.co ★ Asian Shares Rally On US Rate-cut Bets

Asian stocks surged on Thursday as Wall Street's three major indices set record highs overnight. This uptick was fueled by optimism about improving inflation trends and expectations of two interest rate cuts by the U.S. Federal Reserve in 2024.

In Asian trading, gold remained stable after a 1% rise on Wednesday, supported by a decline in the dollar index and U.S. bond yields. Oil prices continued to climb, bolstered by data indicating a more substantial reduction in U.S. crude inventories than anticipated.

China's Shanghai Composite Index edged up slightly to close at 3,122.40. Shares of property developers saw significant gains following reports of government plans to purchase unsold homes.

Hong Kong's Hang Seng Index surged by 1.59% to 19,376.53 as the market reopened after a holiday on Wednesday.

Japanese stocks also advanced, driven by weak GDP data for the January-March quarter, which raised fresh doubts about the timing of potential rate hikes by the Bank of Japan. According to preliminary data from the Cabinet Office, Japan's GDP contracted at an annual rate of 2% in the first quarter, exceeding the 1.5% decline forecast by economists. Consequently, the Nikkei average rose by 1.39%, reaching 38,920.26, while the broader Topix Index increased by 0.24%, closing at 2,737.54.

In Seoul, the Kospi Index advanced by 0.83% to 2,753, driven by hopes of a possible rate cut by the Federal Reserve.

Both Australian and New Zealand markets recorded strong gains, with government bonds rallying and pushing yields lower across the curve. Australia's benchmark S&P ASX 200 jumped 1.65% to 7,881.30, marking its best single-day performance since December 14. The broader All Ordinaries Index rose by 1.61% to close at 8,150.10, led by strong performances in mining, banking, and real estate sectors.

The Australian dollar ended a three-day winning streak after unemployment data showed a higher-than-expected increase last month. This development alleviated pressure on the Reserve Bank of Australia to hike rates again and raised expectations for potential rate cuts early next year.

Across the Tasman Sea, New Zealand's benchmark S&P NZX-50 Index soared by 1.75% to 11,728.06.

U.S. stocks experienced sharp gains overnight, as April retail sales unexpectedly remained flat, consumer prices rose less than anticipated, and the core Consumer Price Index (CPI) slowed. These factors heightened hopes for interest rate cuts by the Federal Reserve in the near future.

Treasury yields dipped when data indicated that consumer prices increased by 0.3% in April after a 0.4% rise in March. Economists had expected another 0.4% increase. On an annual basis, the CPI decelerated to 3.4%, aligning with forecasts. Core inflation slowed from 3.8% to 3.6%, marking the lowest reading excluding food and energy since April 2021.

The S&P 500 climbed by 1.2%, breaking above 5,300 for the first time. Meanwhile, the Dow Jones Industrial Average rose by 0.9%, approaching the 40,000 mark, and the tech-heavy Nasdaq Composite surged by 1.4%.