Asian benchmarks mostly rose Thursday, as investor optimism got a perk from a rally on Wall Street that's on track to break a three-week losing streak.
Japan's benchmark Nikkei 225 surged nearly 2.0 per cent in morning trading to 27,964.16. Australia's S&P/ASX 200 gained 0.8 per cent to 6,783.80. South Korea's Kospi edged up 0.4 per cent to 2,385.55. Hong Kong's Hang Seng slipped 0.3 per cent to 18,986.70, while the Shanghai Composite rose nearly 0.1 per cent to 3,248.76.
Somewhat reassuring to market watchers was Japan's revised seasonally adjusted real gross domestic product, or GDP, for the second quarter, which was revised upward to an annual rate of 3.5% growth, better than the initial estimate at 2.2 per cent.
Data showed private consumption and business spending are holding up in the world's third-largest economy, which has managed to grow for three quarters straight. The on-quarter growth for GDP, or the sum of the value of a nation’s products and services, was revised upward to 0.9 per cent from 0.5 per cent. The annual numbers show how the economy would have grown if the quarterly rate were to continue for a year.
“Economic conditions in the region will continue to be in focus, with China’s trade balance data yesterday revealing challenges in both external and domestic demand,” said Yeap Jun Rong, market strategist at IG in Singapore, referring to Wednesday’s Chinese data.
Investors are also watching for what may happen on interest rates at the European Central Bank's meeting, as well as for comments from US Fed Chair Jerome Powell, later Thursday.
On Wall Street, the S&P 500 rose 1.8 per cent, its biggest single-day gain in four weeks, with roughly 95 per cent of the stocks in the benchmark index closing higher. The Dow Jones Industrial Average rose 1.4 per cent and the tech-heavy Nasdaq climbed 2.1 per cent. Smaller company stocks outgained the broader market, driving the Russell 2000 index 2.2 per cent higher.
The indexes are now all in the green for the week, a welcome respite for traders after a slump in recent weeks that erased much of the market's gains from a July and early August rally.
Wall Street watchers cautioned that the market is likely to see more volatility in coming weeks ahead of the next Federal Reserve interest rate policy update scheduled for September 21.
“It's good that there's an up day, but I would caution anyone not to be too optimistic right now,” said Randy Frederick, managing director of trading & derivatives at Charles Schwab. “You don't have a whole lot of reason for that.”
Wall Street's focus remains on the highest inflation in decades and the Fed's attempt to rein it in with high interest rates. The central bank has already raised rates four times this year and markets expect them to deliver another jumbo-sized increase of three-quarters of a percentage point at their next meeting in two weeks.
The central bank has been clear about its determination to continue raising rates until it feels that inflation is leveling off or cooling. In June, Fed officials projected that the benchmark rate will reach a range of 3.25% to 3.5% by year’s end and roughly a half-percentage point more in 2023.
“We are in this for as long as it takes to get inflation down,” Fed Vice Chair Lael Brainard said at a banking industry conference on Wednesday. “Our resolve is firm, our goals are clear, and our tools are up to the task.”
Traders clawed back some of their recent losses with Wednesday’s rally, which pushed the S&P 500 up 71.68 points to 3,979.87. The Dow rose 435.98 points to 31,581.28, and the Nasdaq gained 246.99 points to 11,791.90. The Russell 2000 climbed 39.68 points to 1,832.
Technology stocks and retailers made solid gains. Intuit rose 3.9 per cent. Target rose 4.4 per cent after announcing that it is dropping the mandatory retirement age for its CEO position, allowing CEO Brian Cornell to stay for three more years.
United Airlines rose 5.5 per cent after raising its revenue forecast following a busy summer travel season. The encouraging update helped several competitors take flight. American Airlines rose 5.1 per cent and Delta Air Lines added 3.3 per cent.
Bond yields fell. The yield on the 10-year Treasury, which influences interest rates on mortgages and other loans, fell to 3.27 per cent from 3.34 per cent late Tuesday. The two-year Treasury yield, which tends to track expectations for Fed action, fell to 3.45 per cent from 3.51 per cent.
In energy trading, benchmark US crude added 74 cents to $82.68 a barrel. US crude oil prices slid 5.7 Wednesday. Brent crude, the international standard, gained 68 cents to $88.68 a barrel.
In currency trading, the US dollar edged up to 143.97 Japanese yen from 143.74 yen. The euro was little changed at $1.00.