Asian stock markets gained momentum on Tuesday, spurred by lower-than-expected US inflation data that bolstered expectations for a Federal Reserve interest rate cut. Japan’s Nikkei 225 rose 1.4%, while South Korea’s Kospi and Hong Kong’s Hang Seng Index also saw robust gains of 0.9% and 1.6%, respectively. Investors appeared reassured as US consumer price data hinted at easing price pressures, reducing the urgency for further monetary tightening.
The inflation report showed a modest 0.2% rise in consumer prices for November, marking a sharp decline from prior months and signaling progress in the Fed’s fight against inflation. Analysts now expect the central bank to pause rate hikes or consider easing monetary policy as early as the first quarter of 2025. This optimism lifted not only Asian equities but also commodities, with oil prices inching up 0.5% amid improved economic sentiment.
The tech sector led the rally, with Chinese technology giants like Alibaba and Tencent posting strong gains as investors took advantage of weaker valuations and renewed confidence in growth prospects. Elsewhere, the Australian dollar strengthened, reflecting growing optimism about global trade recovery and a potential uptick in risk appetite among market participants.
Despite the buoyant mood, some strategists warned against over-optimism, citing lingering uncertainties in the US labor market and potential geopolitical risks. However, for now, market participants appear focused on the positive signals from inflation data and the Fed’s possible pivot, suggesting continued momentum for risk assets in the near term.
