Japan’s Nikkei hits record highs, Asian stocks rise on tech rally, rate-cut hopes

Fueled by a surge in technology stocks and rising expectations of a Federal Reserve rate cut, Asia-Pacific markets rose on Thursday. The highlight was Japan’s Nikkei 225 index, which topped the 42,000 mark for the first time ever.

The Nikkei rose nearly 1%, with technology stocks leading the charge. The broader Topix also hit new highs, rising 0.7%. This rally mirrored the performance of U.S. tech giants the day before, with chipmakers such as Taiwan Semiconductor Manufacturing Company (TSMC) and Nvidia posting significant gains.

However, a separate report from Japan pointed to a potential weakness in the economy. Orders for basic machinery unexpectedly fell for a second straight month, potentially signaling a weakening in capital spending. That could pose a challenge to the Bank of Japan’s plans for policy normalization.

Elsewhere in Asia, South Korea’s Kospi rose modestly despite the Bank of Korea holding interest rates steady. Australia’s S&P/ASX 200 and Hong Kong’s Hang Seng Index also closed higher. Mainland China’s CSI 300 edged up slightly.

Positive sentiment extended to U.S. markets on Wednesday, where all three major indexes closed in record territory. The S&P 500 and Nasdaq Composite reached their 37th and 27th record closes of 2024, respectively. The optimism stemmed in part from hopes of a potential rate cut by the Fed. Economists expect June’s annual inflation rate to be lower than May’s, potentially prompting the central bank to ease monetary policy.

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