TLDR:
- Asian stocks rose, driven by tech shares following Nvidia’s rally
- Japanese markets surged due to weaker-than-expected inflation data
- U.S. consumer inflation was stronger than expected, dampening rate cut hopes
- ECB expected to cut rates, with focus on future policy signals
- Tech stocks, particularly chipmakers, rallied on AI demand optimism
Asian stock markets experienced broad gains on Thursday, September 12, 2024, as investors renewed their interest in technology stocks, particularly Nvidia.
The rally came amid expectations of a rate cut by the European Central Bank (ECB) and despite diminishing hopes for a larger rate cut by the U.S. Federal Reserve next week.
Japan’s Nikkei index led the gains, jumping nearly 3% as the weaker yen boosted export-oriented stocks.
The surge overshadowed hawkish comments from a senior Bank of Japan official suggesting that rates need to reach 1% over time. Japanese markets also benefited from softer-than-expected producer price index inflation data for August, which somewhat undermined recent comments from BOJ officials about the need for further rate hikes.
Technology stocks across Asia followed the strong performance of their U.S. counterparts, with chipmakers leading the way. South Korea’s KOSPI rose 1.2%, while Taiwan’s TSMC surged 4.7%, boosting the Taiwan Weighted index.
The rally was fueled by Nvidia CEO Jensen Huang’s comments about strong artificial intelligence demand, which supported the notion that AI-related stocks could maintain their valuations even as broader economic conditions deteriorate.
In the United States, the previous day’s inflation report showed that core Consumer Price Index (CPI) rose 0.28% in August, slightly above the forecast of 0.2%. This data led markets to adjust their expectations, now predicting a 25 basis point rate cut by the Federal Reserve at its upcoming meeting rather than a more substantial 50 basis point cut.
European markets were poised for solid gains ahead of the ECB’s policy decision.
A quarter-point rate cut was widely anticipated, but investors remained focused on potential signals about future rate moves in October and December. Markets were pricing in only a 40% chance of another cut next month, reflecting the cautious stance of inflation-wary policymakers.
China’s stock markets, including the Shanghai Shenzhen CSI 300 and Shanghai Composite indexes, along with Hong Kong’s Hang Seng, underperformed their regional peers.
Sentiment towards Chinese equities was dampened by reports of U.S. lawmakers preparing additional trade restrictions on the country.
In currency markets, the U.S. dollar gained ground against the Japanese yen, which retreated from its 2024 high of 140.71 per dollar. The euro remained relatively stable ahead of the ECB decision.
The global market focus now shifts to the ECB policy meeting, with investors eagerly awaiting President Christine Lagarde’s post-meeting briefing for insights into future monetary policy direction.
Upcoming U.S. economic data, including weekly jobless claims and producer price index figures, will be closely watched for their potential impact on Federal Reserve decision-making.
