Asia report: Stocks rise after Powell's rate cut comments

Asia-Pacific markets were in the green across the board on Friday, following remarks from US Federal Reserve chair Jerome Powell overnight, indicating that interest rate cuts could be on the horizon pending supportive inflation signals.

Powell, addressing the Senate Banking Committee, refrained from specifying a precise timeline for the cuts, but suggested they could materialise in the near future.

“Asian equity markets are experiencing an increase after significant gains in US markets yesterday, driven by comments from US Federal Reserve chair Powell during his testimony to Congress,” said TickMill market analyst Patrick Munnelly.

“Powell suggested that the Fed is still likely to cut US interest rates this year and that they are close to having enough confidence that inflation is returning to target levels to make a move.

“European Central Bank president [Christine] Lagarde also indicated the likelihood of an ECB rate cut before its summer break, but mentioned that an April move may be premature.”

Markets in the green across the Asia-Pacific region

In Japan, the Nikkei 225 edged up by 0.23% to reach 39,688.94, while the Topix rose by 0.3% to 2,726.80.

Leading the risers on Tokyo’s benchmark was Osaka Gas, up 7.79%, followed by Taisei with a 5.52% rise, and Mizuho Financial which advanced 5.05%.

China's markets also saw positive movement, with the Shanghai Composite climbing by 0.61% to 3,046.02 and the Shenzhen Component increasing by 1.1% to 9,369.05.

Standout gains were recorded in Shanghai by Guosheng Shian Tech and AA Industrial Belting, which were up 10.14% and 10.02%, respectively.

Hong Kong's Hang Seng Index advanced by 0.76% to settle at 16,353.39, supported by notable increases from Xinyi Solar, up 9.44%; China Hongqiao, ahead 5.07%; and Xinyi Glass, which added 4.73%.

In South Korea, the Kospi jumped 1.24% to 2,680.35, with significant gains from SKC and Yuhan of 7.13% and 5.75%, respectively.

Australia's S&P/ASX 200 climbed by 1.07% to reach 7,847.00, buoyed by a 32.9% surge from Virgin Money UK, and a 10.56% rise from Meridian Energy.

The gains for Virgin Money came after the UK bank agreed to be taken over by Nationwide Building Society on Thursday, in a deal worth £2.9bn.

Across the Tasman Sea, New Zealand's S&P/NZX 50 index rose by 1.01% to 11,923.72, with notable gains from Heartland Group and Vista Group of a respective 3.97% and 3.7%.

In currency markets, the dollar was last down 0.28% on the yen to trade at JPY 147.64, while it decreased by 0.27% against the Aussie to AUD 1.5065, and was off 0.14% on the Kiwi to change hands at NZD 1.6175.

On the oil front, Brent crude futures were last up 0.96% on ICE at $83.76 per barrel, while the NYMEX quote for West Texas Intermediate increased 1.2% to $79.88.

Household spending falls further in Japan, Powell signals rate cuts

In economic news, fresh official data showed a concerning trend in Japan's household spending, with a 6.3% year-on-year decrease in January, extending the decline for the 11th consecutive month.

The figure diverged from expectations, falling significantly lower than the 4.3% decline forecasted in a Reuters poll.

On a month-on-month basis, household spending unexpectedly dropped by 2.1%, in contrast to the estimated 0.4% rise according to Reuters polling.

In China, passenger vehicle sales soared 16.3% year-on-year in the January-February period, according to the data from the China Passenger Car Association as reported by Reuters.

January saw a surge in sales to 3.16 million vehicles, representing a 57.1% rise over the year-ago period.

However, February saw a notable decline, with sales plummeting by 21.6% compared to the prior year.

Despite the overall drop in February, sales of electric vehicles (EVs) during the two-month period increased by 18.2% year-on-year, albeit at a slower pace than the 20.8% growth seen throughout 2023.

Overnight, Federal Reserve chair Jerome Powell testified before the Senate Banking Committee, suggesting a cautious approach to interest rate adjustments amid inflationary pressures.

Powell indicated that inflation was approaching a level where policymakers would consider cutting interest rates, emphasising the importance of confidence in sustained inflation at the 2% target.

He highlighted the need for prudence to prevent economic contraction, advocating for policy adjustments to align with the evolving economic landscape.

Reporting by Josh White for Sharecast.com.