Patrick Munnelly, market strategy partner at TickMill, said “Asian stock markets saw gains as excitement around artificial intelligence lifted tech shares, with investors hopeful that upcoming earnings from major companies will confirm the sector’s strong profit trajectory.
“Adding to the positive mood were rising expectations of a potential interest rate cut by the Federal Reserve.”
Japan benchmark jumps on trade optimism
Tokyo’s Nikkei 225 surged 2.17% to a record close of 51,307.65, driven by gains in Advantest, up 22.08%, Mitsui Kinzoku, up 8.11%, and Lasertec, up 7.7%.
Munnelly noted that “companies like SK Hynix and Advantest posted impressive results, boosting Japan’s Nikkei 225 and South Korea’s Kospi indices.
“However, despite the gains, more stocks declined than advanced in both markets, hinting at underlying caution.”
The rally followed Tuesday’s signing of a new rare earths framework between US president Donald Trump and Japan’s prime minister Sanae Takaichi, which investors viewed as a boost to bilateral trade cooperation.
Trump’s visit also included a meeting with Emperor Naruhito at the Imperial Palace, underscoring the diplomatic significance of his first engagement with Japan’s new premier.
Sentiment was further lifted by expectations that the Federal Open Market Committee would deliver another 25-basis-point rate cut, following September’s reduction, which would bring the federal funds rate to a range of 3.75% to 4.00%.
Traders had priced in nearly 100% odds of such a move.
“The FOMC is operating with limited visibility due to the absence of regular data releases caused by the ongoing government shutdown,” said Munnelly.
“However, the September CPI report came in below expectations, and while the official employment report remains unpublished, the latest ADP data indicates private sector job losses in three of the past four months.
“Combined with recent volatility in risk sentiment tied to private credit markets, there is sufficient evidence to justify another 25bp rate cut.”
He added that a more contentious issue is whether the meeting marks the right time to end quantitative tightening, with the pace of US Treasury run-off already slowing significantly.
Japan’s domestic data also showed resilience, with the consumer confidence index rising to 35.8 in October from 35.3, its highest since December 2024, as households reported improved outlooks for income, employment, and durable goods purchases.
Equities advance in China, Seoul
In China, mainland equities advanced, with the Shanghai Composite up 0.7% at 4,016.33 and the Shenzhen Component gaining 1.95% to 13,691.38.
Top performers included Shandong Nanshan Aluminium, Shanghai Industrial Development, and Asia Cuanon Technology Shanghai, all up around 10%, as investors rotated into industrial and technology names.
Hong Kong markets were closed for the Double Ninth Holiday.
South Korea’s Kospi climbed 1.76% to 4,081.15, led by strong gains in MK Trend, Pharmicell, and Doosan.
Economic data showed mixed signals – the manufacturing business survey index slipped to 68 in October from 70, but the broader economic sentiment Index rose to 94.4, up 3.1 points, suggesting a modest recovery in confidence despite softer factory activity.
Munnelly said that “this week is critical for tech investors, as five major US technology giants – accounting for nearly a quarter of the S&P 500’s market value – are set to release their earnings between Wednesday and Thursday.
“Market watchers are eager to see if heavy investments in AI infrastructure will deliver continued profit growth.”
Sydney bourse in the red as inflation picks up pace
Australia’s S&P/ASX 200 fell 0.96% to 8,926.20, pressured by declines in DroneShield, Objective Corp, and Austal.
The drop came after consumer prices rose 3.2% in the third quarter, the fastest increase in more than a year and above both the prior quarter’s 2.1% and economists’ 3% forecast, raising concerns over inflationary persistence and policy tightening risks.
In New Zealand, the S&P/NZX 50 edged 0.05% higher to 13,409.21, supported by gains in Eroad, Sky Network Television, and Skellerup Holdings.
In currency markets, the yen weakened slightly, with the dollar rising 0.11% to JPY 152.27, while the greenback slipped 0.2% against the Australian dollar to AUD 1.5156 and 0.01% against the Kiwi to NZD 1.7295.
Munnelly observed that “the yen strengthened after US Treasury Secretary Scott Bessent commented on the Bank of Japan’s policy flexibility, sparking speculation about a possible rate hike in Japan.
“The dollar index edged higher after two days of declines.”
In commodities, Brent crude added 0.12% to $64.48 per barrel, and West Texas Intermediate rose 0.03% to $60.17.
Reporting by Josh White for Sharecast.com.
