Japan’s stock markets led most Asian indices higher on Thursday, as the country’s Nikkei 225 and the Topix indices posted significant gains, while Hong Kong’s Hang Seng index dropped.
The rise in Japan’s stock market came as the yen weakened against the US dollar, and as the country’s new prime minister made dovish comments about monetary policy, signaling no imminent rate hikes.
Japan’s Nikkei rises on weakened yen and monetary policy signals
Japan’s Nikkei 225 index surged by 2.57% at the market open, while the broader Topix added 2%, reflecting renewed investor optimism.
The primary catalyst behind this upswing was the yen’s depreciation, which fell to as low as 147.15 against the US dollar.
This marked the largest one-day decline in the yen since June 2022.
A weaker yen generally benefits Japanese exporters, as it makes their products more competitively priced in global markets, helping to boost revenues when earnings are repatriated.
This surge in stocks came a day after Japan’s new Prime Minister, Shigeru Ishiba, publicly suggested that economic conditions in the country do not currently support another interest rate hike.
Ishiba’s comments followed a meeting with the Bank of Japan (BoJ) Governor Kazuo Ueda, where both leaders discussed the country’s economic outlook and monetary policy.
“We see no immediate need for a rate hike given current conditions,” Ishiba said, reinforcing the view that Japan will maintain its accommodative stance for the time being.
Chinese rally eases as Hang Seng drops
While Japan’s stock market saw notable gains, Hong Kong’s Hang Seng index dropped 3.3%, reversing some of the gains from earlier in the week.
The Hang Seng index had previously risen by more than 6%, driven by Chinese stimulus measures that aimed to bolster economic growth.
However, it seems that the enthusiasm sparked by China’s support measures has waned, leading to Thursday’s dip in Hong Kong stocks.
The Hang Seng’s previous rally was fueled by a series of support measures unveiled by Chinese authorities, designed to stabilize the country’s property sector and stimulate broader economic activity.
Despite these efforts, investor sentiment has cooled as the stimulus rally begins to taper off.
Key economic data from Australia and Japan
In other regional markets, Australia’s S&P/ASX 200 rose 0.25% after mixed economic data.
Australia’s seasonally adjusted Judo Bank Composite PMI for September came in at 49.6, down from 51.7 in August, indicating a contraction in economic activity as it fell below the 50 mark.
The services PMI for September was 50.5, down from 52.5 in August, also signaling a slowdown in the services sector.
Despite these weaker-than-expected PMI readings, the Australian Bureau of Statistics reported a trade surplus of AU$5.64 billion in August, slightly above market expectations.
This surplus, although down from AU$6.01 billion in July, provided some relief to the Australian market.
Meanwhile, Japan’s au Jibun bank composite final PMI for September came in at 52.0, lower than the 52.9 recorded in August, suggesting a modest expansion in the private sector.
The services PMI also fell slightly to 53.1, down from 53.7 in August, indicating a slight cooling in service sector activity.
Regional markets react to global events
Elsewhere in the region, tensions in the Middle East have kept global investors cautious.
Ongoing conflicts between Israel and Lebanon, coupled with Iran’s missile strikes in response to the killing of Hezbollah leader Hassan Nasrallah, have created uncertainty in global markets.
Despite these geopolitical tensions, US stock markets closed relatively flat on Wednesday, with the S&P 500 gaining just 0.01% and the Dow Jones Industrial Average adding 39 points.
With markets in mainland China closed for the Golden Week holiday until October 8, trading volumes across Asia were slightly lighter than usual.
Taiwan markets also remained closed for a second day as the island braced for Typhoon Krathon.
The surge in Japan’s Nikkei 225 index is primarily attributed to the weakening yen and dovish signals from the country’s leadership, indicating no immediate interest rate hikes.
However, the broader Asian market saw mixed performances, with Hong Kong’s Hang Seng index pulling back after a strong rally earlier in the week.
Investors are now closely watching for further developments in global economic conditions, including ongoing Middle East conflicts and US interest rate expectations, as they continue to shape market sentiment in the coming days.
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