Tech surge, soft economic data calm rate hike fears in Asian markets

August 24, 2023 (MLN): Asian markets rose again on Thursday after soft US and European economic data soothed recent fears that central banks will hike rates further, while tech firms were given a boost by forecast-busting earnings from AI chip titan Nvidia, as APP reported. 

Traders have spent most of August fretting that the Federal Reserve will be forced to tighten monetary policy further owing to a string of reports pointing to a resilient US economy and jobs market.

But news that the country's factory activity continued to shrink in August while the key services sector was weaker than predicted was seen as allowing policymakers to take a step back, with borrowing costs already at a two-decade high.

Expectations for jobs growth in August were also scaled back, providing some much-needed relief to investors, while US Treasury yields retreated from around 15-year highs.

The picture in the eurozone was equally poor, with the purchasing managers' indexes for manufacturing and services both contracting.

"In terms of PMIs in the US and Europe, it's good news for the market because they are now expecting no more rate hikes in the future," said Grace Tam at BNP Paribas Wealth Management, on Bloomberg Television.

The figures come as Fed chief Jerome Powell and European Central Bank head Christine Lagarde prepare to make speeches at a keenly followed annual gathering of central bankers and business leaders at Jackson Hole, Wyoming, on Friday.

Redmond Wong at Saxo said, "This may be another reason for Powell to stay away from committing to further rate hikes but continue to highlight a data-dependent approach."

Krishna Guha of Evercore ISI added, "The recent surge in bond yields has pushed up mortgage and corporate borrowing rates, contributed to the fall in stock prices, and generated upward pressures on the dollar. The Fed will have to consider the tightening in financial conditions when setting rates in the coming months, including the decision on whether to hike in September."

Wall Street's three main indexes soared, with the S&P 500 and Nasdaq up more than 1%.

The gains were supported by a rally across big-name tech firms including Amazon and Apple, which came ahead of the release of earnings from Nvidia that were tipped to beat the firm's forecasts.

And the Silicon Valley giant did not disappoint after the US close, reporting an astounding 843% jump in net profit to $6.2 billion thanks to the growing demand for all things AI.

Shares of Nvidia surged more than 8% in after-hours trading.

And the positive vibes filtered through to Asia, where Hong Kong led gainers by rising more than 1%, while Shanghai, Tokyo, Sydney, Seoul, Singapore, Manila, and Jakarta also rose.

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