Stock markets in Asia experienced significant gains on Thursday as U.S. inflation showed a sharp decline, boosting hopes that the U.S. central bank would halt its interest rate hikes. Inflation in the largest global economy dropped to 3 percent in June, the lowest level in over two years. Technology companies, which are particularly sensitive to higher interest rates, saw substantial gains.
Investors also reacted to disappointing trade data from China, providing further evidence of an economic slowdown in the world’s second-largest economy. Exports fell over 12 percent in June, surpassing economists’ expectations of a 10 percent decline. The demand for Chinese goods has been affected by cautious consumer spending caused by high inflation and rising interest rates. Additionally, imports dropped a larger-than-expected 6.8 percent. This weak data generated hopes for increased support measures from Beijing to revive the economy.
Hong Kong’s Hang Seng Index experienced the region’s largest gain of 2.5 percent, primarily driven by major Chinese technology companies such as Alibaba, Prakwan, and Tencent, which gained over 5 percent. The Shanghai Stock Exchange also rose by 0.9 percent.
In Tokyo, the Nikkei increased by 1.4 percent, with Japanese technology investor SoftBank being one of the top performers with a gain of over 2 percent. Investors welcomed the news that SoftBank plans to list payment company PayPay on the New York Stock Exchange. Electronics conglomerate Sony also performed well, with a 4.7 percent increase. Chip tester Advantest saw a 3.6 percent advancement, while chip equipment maker Tokyo Electron gained over 2 percent.
The Kospi in Seoul rose by 0.9 percent as investors responded to the decision of South Korea’s central bank to maintain interest rates at 3.5 percent for the fourth consecutive time. Inflation for June stood at 2.7 percent, the lowest level since September 2021. Lastly, All Ordinaries in Sydney saw a 1.6 percent increase.
Overall, the significant gains in the Asian stock markets can be attributed to the U.S. inflation cooling sharply, creating optimism that the U.S. central bank will soon put an end to interest rate hikes. However, the faltering recovery in China’s economy, as evidenced by disappointing trade data, highlights the need for additional support measures from the government to stimulate growth.
