Asian Markets Focus: Rate Cut and Leadership Transition in Japan

Asian markets showed mixed results. New Zealand’s rate cut unexpectedly, and Japan’s Nikkei rose after the Kishida announcement. U.S. stocks rallied on soft PPI data.

Global Markets:

• Asian Stock Markets: Nikkei up 0.75%, Shanghai Composite down 0.45%, Hang Seng down 0.43%, ASX up 0.31%
• Commodities: Gold at $2500.35 (0.30%), Silver at $27.7 (-0.04%), Brent Oil at $81.22 (0.66%), WTI Oil at $78.9 (0.74%)
• Rates: U.S. 10-year yield at 3.853%, U.K. 10-year yield at 3.891%, Germany 10-year yield at 2.183%

News & Data:

• (USD) Core PPI m/m: 0.0% vs 0.2% expected
• (USD) PPI m/m: 0.1% vs 0.2% expected

Asian Markets Focus: Rate Cut and Leadership Transition in Japan

Markets Update:

Asian markets presented a mixed bag on Wednesday, driven by significant economic and political developments. The Reserve Bank of New Zealand (RBNZ) made headlines with an unexpected rate cut, reducing its benchmark lending rate to 5.25%, contrary to economists’ expectations of it holding steady at 5.5%.

In Japan, the spotlight shifted to politics as Prime Minister Fumio Kishida announced his decision to step down in September and not seek reelection as the leader of the Liberal Democratic Party. This news influenced the markets because Kishida’s departure will reshape Japan’s political landscape.

Japanese equities saw a positive reaction to Kishida’s announcement. The Nikkei 225 rose 0.75%, and the Topix gained 0.87%. Meanwhile, South Korea’s Kospi experienced a 0.71% increase, with the smaller-cap Kosdaq up 1.62%. Australia’s S&P/ASX 200 posted a modest rise of 0.31%, despite legal troubles for the Australian Securities and Investments Commission over misleading statements about its CHESS project.

Conversely, Hong Kong’s Hang Seng index fell by 0.43%, and mainland China’s CSI 300 dropped by 0.45%. South Korea’s unemployment rate fell to 2.5% in July, its lowest since October 2023. Still, Japan’s manufacturing sector saw a slight decline in business sentiment, according to the Reuters Tankan survey.

In the U.S., stocks surged as July’s producer price index (PPI) rose by just 0.1%, falling short of expectations. The Dow Jones climbed 1.04%, the Nasdaq Composite jumped 2.43%, and the S&P 500 gained 1.68%, approaching record highs from July. Investors are awaiting the July consumer price index (CPI) figures released on Wednesday.

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