Asian shares were mixed in muted trading on Friday as Wall Street continued to rally around artificial intelligence technology, pushing indexes to new records. Japan’s Nikkei 225 jumped 0.7% after the Bank of Japan announced its intention to reduce government bond purchases as it eases out of its ultra-lax monetary policy. Australia’s S&P/ASX 200 fell 0.3%, South Korea’s Kospi edged up 0.1%, while Hong Kong’s Hang Seng and Shanghai Composite slipped. The S&P 500 and Nasdaq also reached new all-time highs on Thursday, with technology stocks driving gains.
Treasury yields in the bond market eased as traders anticipated a slowdown in inflation, leading to expectations of a potential interest rate cut by the Federal Reserve later in the year. Recent updates showed that inflation at both the wholesale and consumer levels was lower than expected, providing some relief to investors. Federal Reserve Chair Jerome Powell expressed optimism about the data, hinting that a rate cut could be on the horizon. The hope is that slowing job market and economic growth will alleviate inflation pressures without causing a severe recession, although high interest rates continue to impact parts of the economy, such as manufacturing.
Despite some companies facing challenges due to the economic environment, there has been a surge in demand for artificial intelligence technology, driving stock prices higher for companies like Broadcom and Tesla. Broadcom reported stronger-than-expected profits for the quarter and raised its revenue forecast for the year, while Tesla saw a boost after CEO Elon Musk hinted at shareholder approval for his pay package. The bond market also saw a drop in yields, with expectations of interest rate cuts by the Fed later this year. Benchmark U.S. crude and Brent crude prices fell, while the U.S. dollar strengthened against the Japanese yen and euro.
Federal Reserve officials are considering one or two interest rate cuts this year, with traders hopeful that cuts could begin as soon as September. The ongoing frenzy around artificial intelligence technology has led to significant gains for companies in the sector, despite economic pressures impacting other industries. The mixed performance of Asian shares reflects the cautious sentiment among investors, as they navigate uncertainties surrounding inflation, interest rates, and economic growth. Overall, global markets remain focused on the potential impact of AI technology on various industries and the broader economy.
