Asian stocks rally on easing Fed tightening expectations

Asian stocks rally on easing Fed tightening expectations

Asian markets experienced broad gains on Monday, buoyed by mixed U.S. jobs data released last Friday, which suggested the Federal Reserve might halt interest rate hikes. The Fed is expected to maintain steady rates for the rest of 2023 if the job market and broader economy continue to decelerate.

Chinese and Hong Kong markets led the regional gains after China's top economic planner announced plans to establish a designated department to support the country's faltering private economy. This announcement spurred a surge in real estate stocks, following news of a deal that could prevent a potential default at Country Garden. Consequently, China's Shanghai Composite index rallied 1.40% to 3,177.06 and Hong Kong's Hang Seng index jumped 2.51% to 18,844.16, while Country Garden shares surged nearly 15% in Hong Kong.

Japanese shares also reached new highs, driven by a weaker yen, signs of a resilient U.S. economy, and the announcement of new stimulus measures in China. The Nikkei average climbed 0.70% to 32,939.18 while the broader Topix index settled 1.02% higher at 2,373.73, renewing a 33-year high led by economically sensitive stocks such as automakers. Both indexes extended gains for a sixth straight session, marking the longest run since mid-May with Honda (NYSE: HMC ) Motor, Toyota, Nissan (OTC: NSANY ), and Mitsubishi Motors (OTC: MMTOF ) jumping between 2% and 3%.

In South Korea, the KOSPI average closed 0.81% higher at 2,584.55 for a second consecutive day on easing worries about additional tightening by the Fed. Steelmaker POSCO (NYSE: PKX ) Holdings soared 5.4% and energy firm SK Innovation added 2%.

Australian markets also advanced ahead of a Reserve Bank of Australia rate decision on Tuesday. The central bank is likely to keep rates on hold due to slowing inflation in recent months. The benchmark S&P ASX 200 rose 0.56% to 7,318.80 while mining giant BHP gained 2.7% after a Brazilian court approved its plans to reorganize its Samarco joint venture.

However, New Zealand's benchmark S&P NZX-50 index slipped 0.14% to 11,513.04.

U.S. stocks ended mostly higher last Friday with weekly gains after data showed a cooling labor market and slowing wage growth, supporting optimism that the Federal Reserve is nearing the end of its tightening cycle. Separate data showed U.S. manufacturing contracted for a tenth straight month in August. The Dow edged up 0.3% and the S&P 500 inched up 0.2%, while the tech-heavy Nasdaq Composite finished marginally lower.

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