Asian Markets Rise as Tech Stocks Jump, Nikkei Falls with Strong Yen

Asian shares experienced a significant rally on Thursday, following a robust rebound in global technology stocks driven by gains in Meta and Nvidia. The anticipation of potential policy easing in the U.S. further supported the surge in global bonds and commodities.

The Federal Reserve maintained steady interest rates overnight but hinted at a possible cut in September. This led traders to speculate that the Bank of England might follow suit, with a 60% probability of a rate cut. The yen extended its impressive rally, gaining another 0.8% to reach a 4.5-month high of 148.82 per dollar, after a 1.8% surge overnight. The Bank of Japan raised interest rates for the second time in 17 years on Wednesday and indicated more tightening might follow.

MSCI's broadest index of Asia-Pacific shares outside Japan rose 0.7%, after ending July largely unchanged. A regional MSCI IT index climbed 2.0%, and Taiwan's shares increased by 1.7%.

Conversely, Japan's Nikkei dropped 3% as the stronger yen negatively impacted the outlook for the country's exporters.

Chinese blue chips declined by 0.3% following a private survey revealing an unexpected contraction in China's manufacturing sector in July, signaling potential challenges for the country's growth momentum.

In the U.S., tech stocks are experiencing a remarkable recovery after a recent sell-off. Nasdaq futures surged 1% in Asia, with shares of Facebook-parent Meta Platforms jumping 7% post-earnings. S&P 500 futures also rose by 0.5%.

Apple and Amazon.com are set to report their earnings later on Thursday. Nvidia has already seen substantial gains, adding approximately $330 billion in stock market value on Wednesday.

Adding to the global risk rally were dovish comments from Fed Chair Jerome Powell, who mentioned that policymakers had a "real discussion" about cutting rates at the July meeting. The central bank also acknowledged that the risks to employment now matched those of rising prices.

As a result, markets, which were already expecting a September rate cut, are now considering a 10% chance of a 50 basis points easing in September.

"Analysts at TD Securities noted that the threshold for the FOMC to start easing policy at the next meeting is not high. While they believe a 50bp cut in September is unlikely, they do not rule out the possibility of the Fed easing policy in the final three meetings of 2024 if inflation continues to improve.

Treasuries rallied to their highest levels since the first quarter. The yield on 10-year Treasuries rose by 2 basis points to 4.037%, having dropped 11 basis points overnight. The dollar's decline against a strong yen dragged down its broader value against a range of currencies. The dollar index slipped 0.2% to 103.87 on Thursday against its major peers, after falling 0.4% overnight.

In commodity markets, oil prices continued their overnight surge after the killing of a Hamas leader in Iran heightened the risk of a broader Middle East conflict. Brent crude futures rose by 0.7% to $81.44 per barrel, while U.S. West Texas Intermediate crude futures increased by 0.9% to $78.61 per barrel. Both benchmarks had jumped about 4% in the previous session.

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