Asian Stock Markets: ASX 200 Hits Record High as Rate Cut Bets Drive Tech Rally

US Markets Climb on Earnings

US equity markets advanced on Thursday, January 30, as investors considered corporate earnings and US economic indicators. The Nasdaq Composite Index gained 0.25%, while the Dow and the S&P 500 climbed 0.38% and 0.53%, respectively.

Microsoft (MSFT) slid by 6.18% after announcing its cloud business would miss third-quarter forecasts. Meanwhile, Tesla (TSLA) advanced by 2.87% after CEO Elon Musk reportedly pledged to launch cheaper models in H1 2025, contributing to the Nasdaq’s gains.

Despite gains, US economic data presented mixed signals, testing market sentiment.

US Data Sends Mixed Signals

The US economy expanded by 2.3% quarter-on-quarter in Q4 2024, down from 3.1% in Q3 2024. While a softer US economy could boost Fed rate cut bets, inflation accelerated in Q4, limiting the scope for a near-term Fed move. Core PCE inflation rose to 2.5%, up from 2.2% in the previous quarter.

Labor market data also weighed on Fed rate cut hopes. Initial jobless claims fell from 223k (week ending January 18) to 207k (week ending January 25), supporting Fed Chair Powell’s cautious stance on rate cuts. A tight labor market could support wage growth, fueling consumer spending and demand-driven inflation.

According to the CME FedWatch Tool, the chances of the Fed keeping rates at 4.5% in March rose from 77.2% on January 29 to 84.0% on January 30. The shift underlined the significance of the inflation and labor market data on sentiment toward the Fed rate path.

Trump Announces Tariffs, Targets BRICS Currency Moves

On January 30, US President Trump announced 25% tariffs on Canada and Mexico, effective February 1. He also warned against BRICS nations moving away from the US dollar, saying,

“The idea that the BRICS Countries are trying to move away from the Dollar, while we stand by and watch, is OVER. We are going to require a commitment from these seemingly hostile Countries that they will neither create a new BRICS Currency, nor back any other Currency to replace the mighty U.S. Dollar or, they will face 100% Tariffs, and should expect to say goodbye to selling into the wonderful U.S. Economy.”

The announcement raised concerns about potential global trade disruptions, pressuring investor sentiment.100% tariffs on BRICS nations could significantly impact trade-orientated economies, including China, potentially triggering a flight to safety.

ASX 200 Hits Another Record High on Inflation Data

Australia’s ASX 200 Index gained 0.32% on Friday morning. Aussie producer prices increased by 0.8% quarter-on-quarter in Q4 2024, down from 1.0% in Q3 2024, boosting bets on multiple RBA rate cuts in H1 2025. The ASX 200 climbed to a record high of 8,567 before easing back. Gold, mining, and tech stocks drove the Index higher.

The S&P/ASX All Technology Index rallied 1.28% amid expectations of a February RBA rate cut. Mining giants BHP Group Ltd. (BHP) and Rio Tinto Ltd. (RIO) posted gains of 1.14% and 0.44%, respectively.

A rebound in gold prices on January 30 sent Northern Star Resources Ltd. (NST) 2.79% higher.

Nikkei Index Flat on Upbeat Economic Data

Meanwhile, Japan’s Nikkei Index edged 0.07% higher on Friday morning despite USD/JPY falling 0.58% to 154.288 on Thursday. Upbeat retail sales, labor market data, and a pickup in inflationary pressures tested demand for Nikkei Index-listed stocks. Japan’s core inflation rate rose from 2.4% in December to 2.5% in January, supporting a more hawkish BoJ rate path.

However, Tokyo Electron (8035) rallied 3.27%, while Softbank Group (9984) advanced by 0.71%. Nissan Motor Corp. (7201) extended its gains from Thursday, rising 0.85%.

Hang Seng Closed for Lunar New Year

The Hang Seng Index and Mainland China markets remained closed on January 31 for the Lunar New Year celebrations. Hong Kong trading resumes Monday, February 3, while Mainland China reopens Wednesday, February 5.

Outlook: Risks and Opportunities

Investors should closely monitor geopolitical risks and trade disputes, which may influence sentiment. While tech and AI stocks could extend gains, trade-sensitive sectors like mining may see increased volatility.

The US administration is considering imposing tariffs on China as early as Saturday, February 1. If the US bypasses China and China’s AI industry continues expanding, Asian markets – particularly Hong Kong, Mainland China, and Australia – could eye near term-gains. However, escalating US-China tensions could weigh on risk sentiment.

Discover strategies to navigate this week’s market trends here.