Stock market today: Asia shares rise amid Bank of Japan focus after the Fed stands pat

Asian shares mostly gained on Thursday as investors awaited the Bank of Japan’s decision on monetary policy later in the week. It is anticipated that the bank will not raise its benchmark rate, but the economy is facing challenges due to the strengthening of the US dollar against the Japanese yen. Market analyst Yeap Jun Rong suggested that if the BOJ maintains its accommodative stance, it could further fuel the upward trend in the USD/JPY exchange rate. In currency trading, the US dollar slipped to 157.14 Japanese yen from 156.71 yen, while the euro declined to $1.0805 from $1.0812.
Following its latest policy meeting, the Federal Reserve decided to keep its main interest rate unchanged, as anticipated. In response to a report on inflation, Treasury yields fell, revealing that American consumers paid prices that were 3.3% higher for various goods and services last month compared to the previous year. This inflation rate was slightly lower than the expected 3.4%.

In the Asian markets, Japan’s Nikkei 225 dipped by 0.2% in afternoon trading, reaching 38,807.36. Australia’s S&P/ASX 200, on the other hand, experienced a surge of 0.4% to 7,749.30. South Korea’s Kospi also saw a significant jump of 1.2% to 2,760.31. Hong Kong’s Hang Seng increased by 0.5% to 18,017.83, while the Shanghai Composite declined by 0.2% to 3,030.12.

On Wall Street, the S&P 500 continued its upward trend by adding 0.9% to reach a new all-time high of 5,421.03. The Nasdaq composite also set a new record, surging by 1.5% to 17,608.44. However, the Dow Jones Industrial Average lagged behind with a slight dip of 0.1% to 38,712.21.
The market was led by smaller companies, which are more sensitive to higher interest rates and rely on borrowing to fuel their growth. As a result, the smaller stocks in the Russell 2000 index saw a 1.6% increase.

The slowdown in inflation is not only beneficial for struggling U.S. households dealing with rising prices, but it also paves the way for the Federal Reserve to potentially lower its main interest rate. This move would alleviate pressure on the economy and stimulate investment prices.

Following the release of the inflation data, various assets such as bitcoin, gold, and copper experienced a rally as investors anticipate future interest rate cuts. Additionally, the measure of investor nervousness in U.S. stocks also decreased.
Federal Reserve Chair Jerome Powell expressed cautious optimism about the latest update on inflation, stating that more positive data will be needed to strengthen confidence. Powell reiterated the Fed’s stance that before considering a reduction in the federal funds rate, which is currently at its highest level in over two decades, they require a substantial amount of data indicating a sustainable progress towards the 2% inflation target.

Powell emphasized the importance of data in guiding the Fed’s decisions, stating that they will closely monitor incoming reports to determine the appropriate course of action. A potential reduction in interest rates could lead to more favorable mortgage rates, providing a boost to the housing market. As a result, companies in the housing industry, such as D.R. Horton and Builders FirstSource, experienced positive stock performance, with the former seeing a 3% increase and the latter jumping 5.3%.
Despite reporting weaker profit for the latest quarter than analysts had expected, Oracle saw a significant jump of 13.3% in its stock, contributing to the overall rise of Wall Street. Financial analysts attribute this increase to strong bookings, particularly contracts related to artificial intelligence training.

The growing interest in AI has been driving stock market records, overshadowing concerns about high interest rates and the economic slowdown they can cause. Nvidia remains a dominant force in pushing the S&P 500 higher, with a 3.5% gain. As the forefront company in the AI frenzy, Nvidia’s total market value has now surpassed $3 trillion.

Apple also played a substantial role in boosting the S&P 500, with a 2.9% increase. Its stock has been surging in the past two days, following a lukewarm initial response to the announcement of various AI-related offerings coming to its operating systems.