Positive market sentiment in Asia despite interest rate uncertainty in Japan

The Asian stock markets showed a generally positive performance on Wednesday. The Japanese Nikkei 225 Index was able to quickly recover after a weak start, recording a gain of 2.3% to 35,464.61 points by mid-morning. On Tuesday, the Nikkei Index had surged by more than 10%, thereby recouping much of the losses it had incurred on its worst day since 1987. These gains followed comments from an official of the Bank of Japan, who emphasized the continuation of loose monetary policy despite a rate hike of 0.1% to 0.25%. However, the slight increase in interest rates led to a domino effect of sales by traders, who had to brace for higher costs associated with carry trades. Early in the week, the Yen had risen sharply against the US Dollar, which weighed on the profits of the Japanese export industry. On Wednesday morning, the Dollar jumped back to 146.47 Yen from 144.44 Yen late on Tuesday, which generally benefits the profits of export manufacturers. In Hong Kong, the Hang Seng Index stood out negatively, losing 0.3% to 16,647.34 points. The Shanghai Composite Index improved by 0.2% to 2,873.25 points. The South Korean Kospi surged by 2.6% to 2,587.78 points, while the benchmark in Taiwan gained more than 3% – both are among the biggest losers in the recent sell-offs, particularly in technology stocks. In the USA, the S&P 500 rose by 53.70 points to 5,240.03. The Dow Jones climbed by 294.39 points or 0.8% to 38,997.66, and the Nasdaq gained 166.77 points or 1% to 16,366.85. All types of stocks recorded gains, driven by strong earnings reports from several large US companies. Kenvue, known for Tylenol and Band-Aids, surged by 14.7%, thanks to better-than-expected earnings. Uber also rose by 10.9% after significantly surpassing expected earnings. Caterpillar saw an increase of 3% after the heavy equipment manufacturer also reported strong results. Despite growing concerns about a slowdown in the US economy, growth remains stable, and many economists view a recession next year as unlikely. The US stock market has recorded solid gains so far in 2024, partly driven by hype around artificial intelligence. However, critics warn of an overvaluation of stocks. In the bond market, yields rose after having significantly fallen since April. The yield on the 10-year US Treasury Note increased to 3.88% from 3.78% late on Monday. It had briefly fallen below 3.70%, sparking speculation about a possible emergency meeting of the Federal Reserve. The US crude oil price fell by 15 cents to $73.05 per barrel. Brent crude oil, the international standard, dropped by 17 cents to $76.31.