Asian stocks creep higher, Australia rises on less hawkish RBA

Investing.com-- Most Asian stocks rose on Tuesday amid persistent optimism over an eventual decline in U.S. interest rates, with indexes in Japan and South Korea blazing past their peers in catch-up trade. 

Australian stocks also extended gains after the Reserve Bank of Australia struck a less hawkish chord than markets were expecting, reinforcing bets that it will not hike rates any further in 2024.

Regional markets took a positive lead-in from Wall Street, particularly from gains in the technology sector after a swathe of strong first-quarter earnings in recent sessions. 

But U.S. stock index futures fell slightly in Asian trade, while overall gains in regional markets were also limited in anticipation of more cues on U.S. rates, specifically from Federal Reserve officials set to speak later in the week. 

Nikkei, KOSPI surge in catch-up trade 

Japan’s Nikkei 225 and South Korea’s KOSPI were the best performers in Asia on Tuesday, rising 1.2% and 1.9%, respectively. 

The two rose in catch-up trade after a long weekend, with their gains coming largely in response to softer-than-expected U.S. nonfarm payrolls data from Friday. Technology stocks were the biggest boosts to the two indexes. 

Friday’s payrolls data was a key point of support for Asian markets, as traders began once again pricing in potential interest rate cuts by the Federal Reserve. Traders see a 48% chance that the Fed will cut rates by 25 basis points in September. 

Gains in other Asian markets were somewhat limited on Tuesday, especially as Fed officials warned that while the central bank will eventually cut rates this year, it still needed more convincing that inflation was coming down. More Fed speakers are also on tap this week. 

ASX 200 gains as RBA strikes less hawkish chord 

Australia’s ASX 200 index rose 1.2%, extending gains after the RBA kept interest rates steady as expected.

While the central bank warned that Australian inflation will take longer to reach its 2% to 3% annual target, it still stopped short of directly warning markets over any potential rate hikes. Traders had fears a warning of more rate hikes after stronger-than-expected inflation data for the first quarter.

Expectations of an extremely hawkish RBA were also undermined by weak retail sales data for the first quarter, which showed that domestic spending was slowing. 

Some weak earnings also limited gains. ANZ Group (ASX:ANZ) fell 0.9% after a middling profit for the six months to March 31. 

Broader Asian markets were muted. A rebound in Chinese shares appeared to be running out of steam, with the Shanghai Shenzhen CSI 300 and Shanghai Composite marking small moves after racing to five-month peaks in April.

Hong Kong’s Hang Seng index fell 0.4% after rising for 10 consecutive sessions, which also saw the index enter a bull market from February lows.

Futures for India’s Nifty 50 index pointed to a muted open, after the index clocked mild losses in the prior session.