A wave of optimism swept across most Asian financial markets at Tuesday’s open, with equities largely drifting higher, spearheaded by gains in China following anticipated rate cuts by Beijing.
Investor sentiment was also buoyed by expectations of a potential rate cut by the Reserve Bank of Australia, contributing to a generally positive tone across the region, including a higher start for Indian benchmarks like the Sensex.
The positive momentum was most evident in Chinese markets.
The Shanghai Shenzhen CSI 300 and Shanghai Composite indexes registered gains of approximately 0.43 percent and 0.26 percent, respectively.
Hong Kong’s Hang Seng index also saw a significant jump, rising by 1 percent.
This upward movement came after China’s central bank cut benchmark lending rates for the first time since October, a move that was widely expected by market participants.
Adding to the accommodative stance, five of China’s largest state-owned banks also lowered their deposit interest rates, further signaling an effort to stimulate economic activity.
Consequently, the blue-chip index was noted as being 0.15 percent higher, with Hong Kong’s Hang Seng Index confirming its 1 percent rise.
Elsewhere in the region, the positive sentiment was mirrored.
Japan’s Nikkei advanced by 0.51 percent in early dealings (later noted as gaining 0.65 percent), while South Korea’s Kospi was up 0.26 percent.
The Taiwan Weighted index also climbed 0.39 percent. Australia’s S&P/ASX 200 traded higher by 0.4 percent, as investors in the country anticipated a potential rate cut by the Reserve Bank of Australia.
Reflecting the broader regional strength, the key MSCI Asia ex-Japan index traded higher by 0.37 percent, hovering near a seven-month high touched in the previous week.
US market stability despite downgrade jitters
While Asian markets found their footing, US index futures showed some early weakness in Asian trading hours, with Nasdaq futures notably down by up to 0.37 percent after US markets closed largely flat in the previous session.
Interestingly, markets in the US did not exhibit a significant negative reaction to the recent credit rating downgrade by Moody’s.
Moody’s decision last week to downgrade its rating for US sovereign credit, citing concerns over the nation’s growing $36 trillion debt pile, had initially triggered a selloff in US Treasuries on Monday.
However, this selling pressure appeared to stabilize by the time Asian markets opened on Tuesday.
Major US stock indexes managed to recover from early losses to end Monday’s session mostly unchanged.
US Federal Reserve officials are approaching the ramifications of the Moody’s downgrade and the unsettled market conditions with caution as they continue to navigate an uncertain economic environment, further complicated by erratic US trade actions.
While not deemed an imminent issue for the Fed, the prospect of higher borrowing costs linked to a deteriorating US financial position could potentially make credit more expensive across the board, thereby creating a restraint on overall economic activity.
Indian equities join the upward trend; rupee weakens
Benchmark Indian stock market indices, the Sensex and Nifty50, also commenced Tuesday’s trading session on a positive note, buoyed by a rally in information technology (IT) and metal stocks.
The S&P BSE Sensex gained 150.58 points to reach 82,210.00, while the NSE Nifty50 added 20.45 points to trade at 24,965.90 as of 9:25 am.
In currency markets, the Indian rupee experienced some weakness, falling 10 paise to 85.52 against the US dollar in early trade.
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