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Global stocks extended a rally on Wednesday, with Japan’s benchmark index following Wall Street to new record highs, after steady US inflation data prompted traders to lift bets that the Federal Reserve would cut interest rates next month.
Japan’s benchmark Topix closed 0.8 per cent to an all-time high, Taiwan’s Taiex closed just short of a new peak and South Korea’s Kospi strengthened 1.1 per cent. The Stoxx Europe 600 climbed 0.4 per cent and the FTSE 100 rose 0.3 per cent in early trading.
The gains followed figures on Tuesday that showed inflation in the world’s largest economy was unchanged at 2.7 per cent in July, defying expectations that Donald Trump’s sweeping tariffs would drive it higher.
Investors said the unexpectedly benign reading had removed the last remaining obstacle to the Fed reducing interest rates at its September meeting, with futures markets pricing in a 96 per cent chance of a quarter-point cut.
Stocks have staged a recovery from the turmoil that convulsed markets in early April, when Trump launched his trade war, as the fears of immediate damage to the global economy have receded. The extension of a US-China trade truce on Tuesday has also lifted investor sentiment.
The rebound in the US, where the S&P 500 index closed up 1.1 per cent and Nasdaq Composite finished 1.4 per cent higher on Tuesday, has been powered by Big Tech stocks.
“The wave of money that’s coming into the market just dwarfs all negative sentiment, especially for the AI boom,” said Wee Khoon Chong, a senior strategist at BNY. “Obviously tariffs matter, but the influx of money matters even more when it’s such a large scale.”
The S&P 500 has rallied 29 per cent from its post-“liberation day” low on April 8. In Asia, Taiwan’s Taiex and South Korea’s Kospi are both up 40 per cent in the period while Japan’s Topix has advanced 35 per cent.
Wednesday’s gains in Asia were driven in part by expectations of continued strong US demand for semiconductor exports from the region, said Jason Lui, head of Asia-Pacific equity and derivative strategy at BNP Paribas.
Chipmaker SK Hynix’s shares rose 3.4 per cent while Sony Group rose 3.5 per cent. Japan’s Maruwa, which produces ceramics for circuit boards and semiconductors, gained 3 per cent and the world’s largest chipmaker Taiwan Semiconductor Manufacturing Company added 1.7 per cent hitting a fresh all-time high.
“Because the US has been so resilient it may have alleviated some concerns” for chip demand, Lui said.
In China, the benchmark CSI 300 index added 0.8 per cent and Hong Kong’s Hang Seng index gained 2.3 per cent.
Chinese equities were also supported by a new consumer loan interest programme and subsidies for loans to consumption sector businesses.
Asian markets stand to benefit from a weaker dollar and lower US rates. The dollar slipped 0.4 per cent against a basket of its peers on Tuesday and fell a further 0.2 per cent on Wednesday.
