Asian stocks traded mostly higher on Friday as investor attention shifted toward the potential for the U.S. Federal Reserve's first interest rate cut in over four years.
Hong Kong markets led the region’s gains, driven by bargain buying in local technology heavyweights, while Japanese stocks under-performed amid cautious comments from the Bank of Japan policymakers.
Regional markets mirrored overnight gains on Wall Street, where investors looked past persistent inflation concerns and continued to bet on a Fed rate cut in the upcoming meeting.
Steady buying in the technology sector contributed to positive momentum in Asian markets, with U.S. stock index futures holding steady during Asian trade.
Hong Kong’s Hang Seng index was the standout performer, extending its rebound into a third session as traders capitalized on discounted prices in local internet stocks.
In contrast, Chinese markets remained subdued, with the Shanghai Shenzhen CSI 300 and Shanghai Composite indexes making only marginal gains after hitting seven-month lows earlier this week. Market sentiment toward China remains cautious amid lackluster economic data for August and concerns about potential new U.S. trade restrictions.
Japan’s Nikkei 225 and TOPIX indexes fell by 0.9%, lagging behind other regional markets. Japanese stocks experienced sharp volatility earlier in the week as investors grappled with mixed inflation signals and hawkish comments from BOJ officials, who warned of potential interest rate hikes if inflation continues to rise.
However, weak producer price index inflation data has cast doubt on the likelihood of a hike. The BOJ will meet next week, with investors awaiting clarity on rate policy and Japanese consumer inflation figures.
Broader Asian markets were mixed as speculation intensified over whether the Fed will opt for a 25 or 50 basis point cut. Although strong inflation data pointed to a smaller cut, signs of labor market weakness rekindled bets on a larger 50 basis point cut.
Traders currently see a 56% chance of a 25 bps cut and a 44% chance of a 50 bps cut, according to the CME FedWatch tool.
Australia’s ASX 200 climbed 0.3%, while South Korea’s KOSPI slipped 0.3%. Futures for India’s Nifty 50 index suggested a slightly negative open, after the index hit a record high on Thursday. Indian stocks have been outperforming most global peers in recent weeks, buoyed by sustained optimism over the country’s economic growth.