Asia Indices Follow US Stocks Higher – Asia Market Wrap

Japanese stocks led gains in Asia as semiconductor- related shares followed their US peers higher. Investors are awaiting Jerome Powell’s testimony to Congress.

The Nikkei 225 Stock Average set a new record, bringing its year-to-date gain to more than 23%. Australian equity indices surged, as did US stock futures, after the S&P 500 closed 0.1% higher on Monday, marking its 35th all-time high of the year. Shares in mainland China and Hong Kong sank, as the dollar strengthened against other major currencies.

Information technology shares were the largest contributors to gains in the MSCI Asia Pacific Index. Sentiment around stocks with high exposure to AI is the most elevated since 2019, based on market’s view of future growth and options pricing, according to Citigroup.

In China, markets are sceptical about the central bank’s fresh liquidity operations, which were announced on Monday, despite authorities tightening their grip on interest rates and exerting stronger control over short-term borrowing costs. Investors saw the move as if the People’s Bank of China had raised interest rates, causing a bond market selloff. Market participants are also looking ahead to one of the country’s largest annual policy summits, which is coming up next week.

The Bank of Japan will speak face-to-face with market participants over the next couple of days in key meetings aimed at gauging a realistic pace for a reduction of its bond purchases to be announced later this month. Demand increased at a Japanese five-year auction even as traders speculated about when and how much the BOJ will trim back bond buying.

Australian consumer sentiment worsened in July as households worried about the prospect for further rate increases with inflation proving stickier than anticipated. Australia’s bonds mirrored Monday’s Treasury move, with shorter-term notes underperforming longer ones.