Asian stocks track US gains in 'Santa Claus rally'

Asian markets began higher on Wednesday, after Wall Street’s Christmas holiday gains, with investors expecting that the US Federal Reserve may slash interest rates as soon as March.

Japan, Australia, and Hong Kong all saw gains, with the latter two returning after the Christmas market vacation.

Since the Fed’s previous meeting, when it hinted that the rate-hike cycle may be reaching its conclusion and inflation may be slowing, market sentiment has been mainly upbeat.

Global markets were also boosted by the so-called “Santa Claus rally,” which has typically seen equities rise – albeit at a slower pace – during the end-of-year holiday season.

“Since ’69, the S&P has averaged a 1.3 per cent gain in the Santa Rally, and with the market up so much this year, punctuated with an 8-week winning streak, there are not many sellers willing to book taxable gains to avoid a weak possibility of a correction,” said investor Louis Navellier in a note.

Still, the main focus for investors will remain US interest rates, whose rate-hike cycle has driven market activity ever since it began last year.

“The bets for a March Fed cut continue to grow, helping to propel stocks higher,” said Navellier.

“Interest rates are essentially flat, and the US dollar index continues to fall.”

On Tuesday, Wall Street equities maintained their upward trend, with the Dow and broad-based S&P 500 both increasing 0.4 per cent, and the tech-heavy Nasdaq Composite Index rising 0.5 percent.

Apple, on the other hand, defied the growing trend, with its stock dropping 0.3 per cent after a US ban on several of its smartwatch models went into force as a result of a patent dispute.

The prohibition is the result of a lawsuit filed with the International Trade Commission in mid-2021 alleging Apple of infringing on the “light-based oximetry functionality” of medical equipment producer Masimo Corp.

Currency markets saw few changes on Wednesday morning, with the euro and British pound almost unchanged against the dollar.

The yen was also steady, standing at 142.70 to the dollar, compared with 142.34 yen in New York trading.

Key figures around 0230 GMT

Tokyo – Nikkei 225: UP 1.1 per cent at 33,682.86

Hong Kong – Hang Seng Index: UP 0.7 per cent at 16,454.05

Shanghai – Composite: DOWN 0.25 per cent at 2,891.73

Dollar/yen: UP at 142.70 yen from 142.34 yen on Tuesday

Euro/dollar: UP 0.12 per cent at $1.1030

Pound/dollar: UP 0.17 per cent at $1.2721

Euro/pound: UP 0.05 per cent at 86.71 pence

West Texas Intermediate: DOWN 0.4 per cent at $75.28 per barrel

Brent North Sea crude: DOWN 0.2 per cent at $80.88 per barrel

New York – Dow: UP 0.4 per cent at 37,545.33 (close)