Asian stocks rise on Fed rate cut expectations

December 28, 2023 (MLN): Asian stocks opened largely higher on Thursday, with Hong Kong leading the gains as investors worked on expectations the US Federal Reserve will cut rates next year, as APP reported.

Tokyo edged down at the open, weighed by a strengthening yen, with the currency also buoyed by expectations around the Fed's monetary policy.

Investors have been optimistic since the Fed's most recent meeting when it signalled its rate-hike cycle could be nearing an end as global inflation slows. 

Across Asia, most bourses were in positive territory on Thursday, with Shanghai, Seoul, Sydney, Taipei, Wellington, Jakarta, Manila, Singapore and Kuala Lumpur all rising at the open. 

On Wednesday, the Dow Jones Industrial Average led gains on Wall Street, advancing 0.3% to finish at another all-time high of 37,665.52.

US indices returned to work on Tuesday, but European markets were only back on Wednesday, with London leading the way as it closed 0.4% higher.

 While US inflation has slowed, it remains above the Fed's long-term target of around 2%, and analysts warned that consumer spending had still not bounced back to healthy levels. 

US retail sales over the key holiday shopping season were up 3.1% YoY, according to the Mastercard SpendingPulse survey, but that was markedly down from the previous year's 7.6% jump.

"This is a reflection of a more cautious consumer and less discounting from retailers due to better inventory management," said investor Louis Navellier in a note.

While inflation is falling, the runup from last year's high rate has still squeezed budgets against a modest wage growth closer to 4%.

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