Asian stock markets saw an increase on Wednesday morning after a strong performance on Wall Street, where technology companies bounced back from a big selloff that affected markets around the world. Japanese and Australian stocks rose, while many others in the region were closed for the Lunar New Year holiday.
In the US, stock futures fell after the S&P 500 went up by 0.9% and the Nasdaq 100 increased by 1.6% on Tuesday. Notably, Nvidia’s shares jumped by 8.9% after experiencing a massive drop in value recently. The US dollar and oil prices also rose after President Trump suggested implementing broad tariffs.
Investors were initially worried that a low-cost artificial intelligence model from a Chinese startup would make the high prices of tech companies harder to justify. However, some investors, like Steve Cohen, believe this could be good for the industry. Many are now focused on the Federal Reserve’s upcoming decision on interest rates and the start of earnings reports from major tech companies. Kenny Polcari from SlateStone Wealth advised that while the recent market fluctuations were unsettling, there’s no need to panic.
In Australia, core inflation fell more than expected in the last quarter of 2024, causing the Australian dollar to drop. Meanwhile, investors believe the Reserve Bank may soon start lowering interest rates. In the US, although profits from top tech companies are still growing fast, the growth rate is expected to be the slowest in almost two years.
Emily Bowersock Hill from Bowersock Capital Partners pointed out that while the story around AI is still strong, investing in it might not be as easy as in the past two years. She believes that investors will be more careful when choosing AI stocks moving forward.
The Federal Reserve is widely expected to keep interest rates steady on Wednesday, even as demand remains strong and inflation stays high. Bond traders are hopeful that Fed Chair Jerome Powell might hint at a possible rate cut in March. A survey showed that most people expect the Fed’s response to be mixed, with some feeling cautious and others feeling optimistic.
The yield on 10-year US Treasuries dipped slightly to 4.52%. Oil prices rose early Wednesday after gaining 0.8% a day earlier. Win Thin from Brown Brothers Harriman noted that strong US economic growth, high inflation, and a more aggressive Federal Reserve support higher US yields and a stronger dollar. Many believe that this Fed meeting will not greatly impact the stock market, with the focus shifting to the Fed’s plans for the upcoming year. It’s expected that inflation and interest rates will stay high for a while, with only one possible rate cut in 2025
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