Asia report: Stocks rise after Fed decision, wave of regional data

Asia-Pacific markets finished with a generally positive performance on Thursday, buoyed by the US Federal Reserve's latest policy stance.

Japan led gains with stocks reaching all-time highs, following the Fed's decision to maintain interest rates between 5.25% and 5.5% and its forecast for three rate cuts in the current year.

The outlook was derived from the Fed's ‘dot plot’ which, despite not specifying the timing, projected three rate reductions in 2025, marking one cut less than it anticipated in December.

“In response to the US Fed's decision to maintain interest rates and reaffirm expectations for three quarter point interest rate cuts later this year, Asian stock markets are mostly trading higher on Thursday,” said TickMill market analyst Patrick Munnelly.

“The latest projections indicate that Fed officials anticipate a decrease in rates to a range of 4.5% to 4.75% by the end of 2024.

“The Fed acknowledged that inflation has decreased over the past year but stated the need for ‘greater confidence’ in inflation moving sustainably towards 2% before implementing rate cuts.”

Munnelly said Japan’s equity markets, continuing their upward momentum from the last two trading days, were up significantly on Thursday, taking cues from the positive performance of Wall Street overnight.

“The Nikkei 225 has surpassed the 40,500 mark to reach new record highs, with most sectors experiencing gains driven by major index components and financial stocks.

“This surge comes as traders respond to the US Federal Reserve's confirmation of expectations for three interest rate reductions this year.”

Markets in the green across region, mainland China the exception

In Japan, the Nikkei 225 jumped 2.03% to 40,815.66, while the Topix index rose 1.64% to 2,796.21.

Leading the gainers on Tokyo’s benchmark was Concordia Financial Group, climbing 6.78%, followed by Tokyo Electric Power Co with a 6.09% gain, and Chiba Bank, which rose by 5.83%.

Contrastingly, China's markets slightly retreated, as the Shanghai Composite edged down 0.08% to 3,077.11, and the Shenzhen Component fell 0.36% to 9,682.51.

Hefei Metalforming Intelligent Manufacturing dropped 6.51% to lead the losers in Shanghai, followed by GuangDong Super Telecom, down 5.57%.

In Hong Kong, the Hang Seng Index rose 1.93% to 16,863.10, with China Hongqiao Group, Hong Kong and China Gas Co, and Longfor Properties among the top gainers.

South Korea's Kospi advanced by 2.41% to 2,754.86, bolstered by impressive gains in SK Square and Samsung Fire & Marine Insurance.

Australia's S&P/ASX 200 gained 1.12%, reaching 7,782.00, with Webjet and Bellevue Gold leading the charge.

New Zealand's S&P/NZX 50 saw a modest increase of 0.7% to 11,915.71, with Restaurant Brands New Zealand and Westpac Banking Corporation among the top performers in Wellington.

In currency markets, the dollar was last down 0.1% on the yen, trading at JPY 151.11, while it weakened 0.25% against the Aussie to AUD 1.5145.

The greenback managed to strengthen 0.01% on the Kiwi, however, last changing hands at NZD 1.6445.

On the oil front, Brent crude and West Texas Intermediate futures were in the red, with the former last down 0.27% on ICE at $85.72, and the latter slipping 0.32% on NYMEX to $81.01 per barrel.

NZ enters technical recession, Japan trade deficit narrows

In economic news,New Zealand unexpectedly entered a technical recession as fresh figures revealed a 0.1% contraction in gross domestic product (GDP) for the fourth quarter of 2023, defying economists' forecasts for 0.1% growth.

The contraction followed a 0.3% decrease in the third quarter, marking two consecutive quarters of economic decline - the benchmark for a technical recession.

Despite that, the country's GDP managed a year-on-year expansion of 0.6%, although that was a slowdown from the 1.3% growth seen in the prior quarter.

Meanwhile, Japan reported a stronger-than-expected economic performance with a 7.8% increase in exports year-on-year in February, surpassing the predicted 5.3% rise.

That growth, however, decelerated from the 11.9% uptick registered in January.

Imports in February grew 0.5%, against expectations of a 2.2% increase, following a 9.8% decrease in January.

As a result, Japan's trade deficit narrowed significantly to JPY 379.4bn, less than half of the forecasted JPY 810.2bn deficit, presenting a marked improvement from January's JPY 1.76trn deficit.

The country also saw its fastest pace of business activity expansion since May last year, according to the au Jibun Bank flash purchasing managers’ index (PMI).

March's composite PMI ascended to 52.3 from February's 50.6, signalling expansion.

The manufacturing sector showed signs of recovery with a PMI of 48.2, and the service sector's PMI leaped to 54.9 from 52.9.

In a related development, business confidence among major Japanese firms surged to a three-month high in March.

The Reuters Tankan survey highlighted a significant uplift in the services sector mood to a seven-month peak.

Manufacturers’ sentiment shifted positively to +10 in March from -1 previously, and the service sector's index improved to +32 from +26.

That optimism followed the Bank of Japan's decision to raise interest rates for the first time since 2007, exiting its negative rates regime, a day earlier.

Finally on data, Australia's job market showed robust health, with the unemployment rate dropping to 3.7% in February from January's 4.1%, beating the 4% prediction.

The improvement was attributed to a notable increase in employment figures, with 116,500 people finding jobs, far exceeding the anticipated 40,000 increase and marking a significant uptick from January's revised figure of 15,300.

Reporting by Josh White for Sharecast.com.