Asian stocks advanced on Thursday as further signs of cooling U.S. inflation boosted hopes for potential interest rate cuts by the Federal Reserve. Additionally, a series of positive economic indicators from the region bolstered market sentiment.
Japanese and Chinese markets led the gains, with both countries reporting stronger-than-expected economic data. Japan’s economy grew more robustly than anticipated in the second quarter, while Chinese retail spending saw a notable increase in July.
Regional markets followed a positive lead from Wall Street, where U.S. stock benchmarks reached a two-week high after consumer price index inflation data came in cooler than expected. U.S. stock index futures also rose slightly during Asian trading, with the softer inflation data reinforcing expectations that the Fed might cut rates in September.
Japanese Stocks Rise as Q2 GDP Exceeds Expectations
Japan’s Nikkei 225 and TOPIX indexes climbed approximately 0.9%, both nearing a two-week high. The surge was driven by GDP data revealing that Japan’s economy expanded more than expected in the second quarter, fueled by a rebound in private consumption. This rebound was attributed to the significant wage hikes secured by Japanese labor unions earlier this year, which are now having a broader impact across the country.
The positive GDP results suggest an improved outlook for Japan’s economy, particularly after a sharp contraction in the first quarter. This aligns with the Bank of Japan’s (BOJ) perspective that higher wages will spur increased spending in the coming months, supporting local growth and benefiting domestically-focused stocks.
However, a stronger Japanese economy may provide the BOJ with more flexibility to raise interest rates further, particularly if inflation also rises. This possibility could temper overall gains in Japanese markets.
Chinese Stocks Surge on Positive Retail Sales Data
China’s Shanghai Shenzhen CSI 300 and Shanghai Composite indexes each gained over 1%, following data that showed retail sales in the country grew more than expected in July.
Hong Kong’s Hang Seng index rose 0.6%, although its gains were capped by a 0.6% decline in Tencent Holdings Ltd (HK:0700), despite the tech giant reporting strong earnings for the second quarter.
The positive retail sales data led investors to overlook weaker-than-expected figures in industrial production and fixed asset investment. However, China’s unemployment rate unexpectedly increased to 4.2%, adding some caution to the outlook.
Consumer spending has been a key concern for China’s economy, with deteriorating conditions leading consumers to cut back on spending. Market sentiment toward China will face another major test on Thursday, as e-commerce giants Alibaba Group (HK:9988) (NYSE
) and JD.com (HK:9618) (NASDAQ)—both considered indicators of consumer spending—are set to report their quarterly earnings.
Broader Asian Markets
Australia’s ASX 200 rose 0.5%, but further gains were limited by a stronger-than-expected jobs report, which heightened concerns over additional interest rate hikes.
South Korean and Indian markets were closed for the day.
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