Asian markets witnessed substantial gains on Friday, propelled by the successful passage of the US debt-ceiling bill and indications of a potential policy pause by select Federal Reserve policymakers. Following the lead of the S&P500, major Asian indices rallied and closed with notable increases on Thursday.
Struggling to exhibit signs of a promising recovery, the US Dollar Index (DXY) faced challenges after a sharp decline triggered by dovish remarks from Federal Reserve policymakers.
In a speech on Wednesday, Fed Governor Philip Jefferson expressed that a pause in rate hikes at the upcoming FOMC meeting would allow for a thorough analysis of data before deciding on the extent of further tightening. He emphasized that a pause does not signify the peak of interest rates.
Currently, Japan’s Nikkei225 surged by 0.94%, ChinaA50 experienced a notable rise of 1.46%, Hang Seng galloped forward by 3.45%, while Nifty50 remained relatively subdued.
Japanese equities skyrocketed following Bank of Japan (BoJ) Governor Kazuo Ueda’s statement before Parliament, affirming that monetary policy will continue to remain accommodative. Ueda highlighted that the economy would require additional time to achieve the 2% price goal.
The persistence of an ultra-dovish monetary policy benefits stocks as the injection of liquidity into the economy ensures companies have sufficient funds to enhance their fixed and working capital requirements.
Chinese stocks made a strong recovery as investors gained confidence in the economy’s effective rebound, triggered by the release of positive Caixin Manufacturing PMI data.
Domestic factory activity remained robust in May, with economic data surpassing expectations at 50.9, surpassing both consensus forecasts and the previous release of 49.5. A figure above the 50.0 threshold indicates expansion in economic activities.
Meanwhile, the Indian market experienced increased volatility as investors shifted their attention to the upcoming interest rate decision by the Reserve Bank of India (RBI), set to be announced next week. A Bloomberg survey revealed that the RBI is expected to maintain its repo rate at 6.5% throughout the year, with a projected 25 basis points (bps) rate cut in the first quarter of the next financial year.
In the realm of oil, prices demonstrated a recovery after successfully defending the crucial support level of $70.00. This development came amidst expectations that OPEC+ would announce production cuts during their meeting scheduled for June 4th, aiming to bolster lower energy prices.
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