Rate Cut Optimism Boosts Asian Markets, Japan's Household Spending Declined 11th Consecutive Month

Arjun Pandit
07 Mar, 2024
Mumbai

Asian markets traded higher on the final day of the week on speculation that major central banks are laying the groundwork for a pivot rate cut as early as June. 

Benchmark indexes in Japan rebounded and trimmed losses in the previous session in the hopes that major central banks will pivot to trimming interest rates later in the year. 

The Japanese yen edged higher to 147.20 against the U.S. dollar on widespread speculation that the Bank of Japan is likely to end its ultra-loose policy at the end of two-day meeting on March 19. 

Moreover, tech and semiconductor stocks rallied on the persistent enthusiasm linked to the boom in artificial intelligence-related demand for chips, servers, and application providers. 

The Nikkei 225 Stock Average gained 0.7% to 39,877.01, and the Topix index added 0.6% to 2,734.10. 

For the week, the Topix index advanced 1.0%, but the Nikkei index fell 0.6%. 

Tech stocks rebounded, and Tokyo Electron, Advantest, Softbank, Disco Corp., and Screen Holdings increased between 1.5% and 2.5%. 

 

Japan's Household Spending Decline Extends to the Tenth Month

Japan's household spending declined for the 11th month in a row in January, the Ministry of Internal Affairs & Communications reported Friday. 

Household spending fell 6.3% from a year ago in January, the steepest decline since February 2021, driven by sharp declines in food, fuel, transportation, and housing costs. 

Household spending in December fell 2.5%. 

 

Japan's Current Account Swings to Surplus 

Japan reported a current account surplus of 438.2 billion yen in January, the Ministry of Finance said on Friday, following the 744 billion yen surplus in December. 

Imports declined 12.1% from a year ago to 8.783 trillion yen, and exports gained an annual 7.6% to 7.340 trillion yen, resulting in a trade deficit of 1.442 trillion yen. 

The capital account reported a deficit of 100 million yen, while the financial account had a surplus of 1.808 trillion yen.

 

Global Rate Cut Hopes Lift China Stocks 

Stocks in Shanghai struggled, but in Hong Kong they advanced as investors debated monetary policy stimulus measures by the central banks. 

The People's Bank of China Governor Gongsheng commented that banks could lower reserves and offer more loans to individuals and businesses. 

During a panel discussion of Chinese lawmakers's annual legislative, Governor Gongsheng said China's reserve requirement ratio is still higher than its peers, and there is room to lower the ration. 

Investors also took note of positive comments from Fed Chair Jerome Powell that the central bank is well aware of cutting rates too late and that policymakers are willing and ready to lower rates once inflation is on a sustainable path towards 2%. 

The European Central Bank's President Christine Lagarde also suggested that the market view of a rate cut after the June policy meeting is converging with the view of the central bank. 

The CSI 300 index declined 0.05% to 3,527.82, and the Hang Seng index advanced 1.3% to 16,441.33. 

For the week, the CSI 300 index fell 0.3% and the Hang Seng index dropped 1.2% after advancing in the previous week. 

Tech stocks in Hong Kong advanced, and Alibaba Group, JD.com, Baidu, and Tencent added between 0.5% and 1.1%. 

Wuxi Biologic and Wuxi Apptec rebounded 3%, recouping some of the losses from the previous session after the U.S. Senate committee advanced a bill preventing Chinese biotech companies from doing business with U.S. government agencies. 

Property developers generally declined after lawmakers failed to provide specific and substantial stimulus to revive the moribund property market. 

China Vanke, China Resource Land, Henderson Land, and Sun Hung Kai declined between 0.3% and 0.8%. 

 

India Indexes Extend Weekly Gains 

Financial markets were closed for a holiday in India, and benchmark Sensex and Nifty indexes advanced 1.5% in the week to close at a new record high after a volatile week. 

Gujarat State allocated more land to accelerate the setting up of semiconductor production plants  for Tata Group and CG Power. 

NTT Data Group is in the process of expanding one of its 14 data centers in India, as demand for data storage and transfer is expected to double over the next five years. 

The company is planning to invest as much as $2.4 billion this year in expanding its data centers in the U.S., where demand is driven by artificial intelligence applications, and India, where broader digital connectivity adoption is growing at a rapid clip.