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MARKETS TODAY: Asian stocks climb, Yen continues descent

May 6, 2024

Key Points:

  • Asian stocks reach new heights with investors expecting U.S. Federal Reserve rate reductions.
  • The yen declines after Tokyo’s apparent efforts to strengthen it last week.

Asian stocks reached their highest levels in more than a year this Monday, driven by growing expectations that the U.S. Federal Reserve might reduce interest rates later this year. Although trading volumes were lower due to a holiday in Japan, the positive mood has seemingly spread across other major Asian markets.

Asian market movement

The MSCI index of Asia-Pacific shares outside Japan saw an increase, reaching its highest since February 2023 with a gain of 0.53%. In China, the blue-chip index saw a rise of 1.5% as markets in mainland China started strongly after a long holiday.

Hong Kong’s Hang Seng Index, after increasing 4.7% last week, saw a minor decline of 0.1% on Monday. Despite this, the index had recorded its longest series of daily gains since 2018 on the previous Friday. Similarly, the Nasdaq-listed Golden Dragon China Index displayed an increase of 5.5% over the previous week.

SEE: Hong Kong HSI sees slight dip on the VT Markets trading app.

In forex markets, the yen weakened after a strong increase last week, likely due to Tokyo’s apparent intervention efforts. This shift comes after data suggesting that more than 9 trillion yen ($59 billion) might have been used to support the yen, propelling it from a 34-year low to a much stronger position within a week.

RELATED: Sakura Viewing in Japan is Now Cheaper with Weakening JPY

Recovering China

Economically, China shows signs of revival, with recent data revealing a minor slowdown in the expansion of services activity due to increasing costs. However, there was a noticeable acceleration in new orders and a strong improvement in business sentiment. This mixed data suggests a moderately optimistic outlook for China’s economic progression.

Future market dynamics could be influenced by several factors, including the execution of China’s declared supportive fiscal policies and possible changes in earnings growth estimates, which are essential for sustaining equity market momentum.

The broader Asian market rally also benefited from the latest U.S. employment data, which was less robust than anticipated.

In commodities, both Brent and U.S. crude oil futures experienced slight increases, reflecting a stable yet cautiously optimistic market view. Gold also increased in value, adding another element to the financial landscape as it often acts as a safe-haven during times of uncertainty.