Asian equities are set for a surge following a rally in US stocks, which reached new highs as the Federal Reserve hinted at aligning with market expectations for three rate cuts this year. The anticipation of easing monetary policy has sparked optimism across global markets.
Australian shares, along with equity futures in Japan and Hong Kong, saw gains. The S&P 500 index climbed by 0.9%, reaching a new peak, while the Nasdaq 100 index, sensitive to policy changes, increased by 1.2%. This positive momentum is attributed to the Federal Reserve's indication of potential rate cuts and a slowdown in bond holding reductions, despite recent inflation concerns.
The "Magnificent Seven" group of mega-cap stocks hit new highs, with US small-caps also experiencing a significant uptick, marking their best session in over a month. This rally reflects growing confidence in the economy's expansion.
Meanwhile, bond markets in Australia and New Zealand echoed the rise in Treasuries, with short-end yields dropping significantly. This movement is a reaction to increased expectations of a Fed rate cut as early as June, leading to the dollar's depreciation.
Analysts, including Hebe Chen from IG Markets in Melbourne, predict a "relief rally" in Asian markets, driven by a clearer near-term economic outlook, particularly benefiting the Japanese market.
In the currency sector, the yen and the New Zealand dollar saw improvements, with the latter rebounding from earlier losses after surprising GDP data. The New Zealand economy entered a recession in the latter half of 2023, challenging expectations.
On the corporate front, Micron Technology Inc. experienced a surge in its stock value following a strong revenue forecast. Similarly, Tencent Holdings Ltd. is set to increase its stock buyback program, indicating robust corporate confidence.
Commodity markets also reacted positively, with gold surpassing $2,200 an ounce and Bitcoin nearing $68,000, both benefiting from the anticipated lower interest rate environment. Additionally, US oil prices saw an increase, recovering from a previous drop.
Key global economic indicators and corporate earnings reports are expected this week, including Eurozone PMI data, the Bank of England rate decision, and earnings from Nike and FedEx, which will provide further insights into the economic landscape.
