Asian stocks rise on Fed rate cut optimism

Asian market indicator. | Credit: AFP

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Asian equities rose Friday as investors tracked a record day on Wall Street in the wake of the Federal Reserve’s latest interest rate cut.

The gains came despite renewed concerns about tech valuations after disappointing earnings from sector giants Oracle and Broadcom.

Markets ended a mixed week on a strong note, with eyes now on the release of delayed US jobs data next week, which could provide an insight into the central bank’s plans for next year.

Figures released Thursday showed initial jobless claims rose more than expected in the week ended December 6, marking their biggest increase for five and a half years and reinforcing the view of a softening labour market.

Traders welcomed Fed boss Jerome Powell’s post-meeting comments Wednesday — which were seen as less hawkish than feared — but the policy board’s statement suggested it could hold off a fourth straight cut in January.

And analysts said the fact that three decision-makers unusually dissented complicated the policy outlook.

Still, investors in New York continued to look at the positives, pencilling in more cuts next year and pushing the S&P 500 and Dow to fresh records.

Asia followed suit, with Tokyo, Hong Kong, Sydney, Singapore and Seoul up more than one percent, while Shanghai, Wellington, Taipei, Mumbai and Manila also rose.

Jakarta slipped, while Bangkok was barely moved as investors brushed off news that Thailand’s prime minister had dissolved parliament, paving the way for general elections early next year.

“So, (the Fed being) not as hawkish as it could have been and despite only one cut next year pencilled in, a new Fed chair and cooling jobs market means markets think there is more to come,” said Neil Wilson at Saxo Markets.

The gains came despite worries about an AI-led tech rally that has seen many firms chalk up eye-watering gains, with chip giant Nvidia becoming the first to break a $5 trillion valuation in October.

With warnings that the hundreds of billions of dollars pumped into AI may have been overdone — and investors might have to wait some time before seeing any returns — analysts say valuations could be overstretched and a bubble forming.

Those worries were compounded on Thursday as earnings from chip titan Broadcom failed to meet investors’ lofty expectations, and its outlook for AI sales disappointed. Its shares fell more than four per cent in after-hours trade.

The news came a day after software firm Oracle reported quarterly revenue had fallen short of forecasts and revealed a surge in spending on data centres to boost AI capacity.

Shares in Oracle ended down 10.8 per cent in New York.

In corporate news, tech investment giant SoftBank jumped 3.9 per cent as Bloomberg reported that the firm is looking a more acquisitions, including data centre operator Switch, as it looks to build its influence in the AI sector.

– Key figures at around 0710 GMT –

Tokyo – Nikkei 225: UP 1.4 per cent at 50,836.55 (close)

Hong Kong – Hang Seng Index: UP 1.6 per cent at 25,950.53

Shanghai – Composite: UP 0.4 per cent at 3,889.35 (close)

Dollar/yen: UP at 155.68 yen from 155.58 yen on Thursday

Euro/dollar: DOWN at $1.1737 from $1.1741

Pound/dollar: DOWN at $1.3394 from $1.3394

Euro/pound: DOWN at 87.63 pence from 87.65 pence

West Texas Intermediate: UP 0.6 per cent at $57.94 per barrel

Brent North Sea Crude: UP 0.5 per cent at $61.60 per barrel

New York – Dow: UP 1.3 per cent at 48,704.01 (close)

London – FTSE 100: UP 0.5 per cent at 9,703.16 (close)

AFP

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