Asian shares displayed a mixed performance on November 21, 2023, following a robust rally in U.S. markets driven by optimism surrounding a potential interest rate cut by the Federal Reserve. The sentiment on Wall Street propelled the S&P 500 up by 1.5%, while futures markets indicated a slight decline ahead of the Thanksgiving holiday.
In Japan, the Nikkei 225 index opened after a holiday, gaining less than 0.1% to reach 48,644.92. South Korea’s Kospi index remained nearly flat, trading at 3,848.00. In contrast, Taiwan’s Taiex showed a notable increase of 1.4%. Positive momentum was also seen in Chinese markets; the Hang Seng index in Hong Kong rose by 0.6% to 25,875.36, while the Shanghai Composite index surged by 1.1% to 3,880.22. Notably, e-commerce giant Alibaba saw its shares rise by 2.4% ahead of its earnings report scheduled for later that day.
Australia’s market diverged from the upward trend, as the S&P/ASX index dipped by 0.2%, settling at 8,510.30. U.S. markets are set to close on November 23 for the Thanksgiving holiday, followed by the shopping frenzy of Black Friday and Cyber Monday.
The significant gains in U.S. stocks on November 20 provided a backdrop for the Asian markets. The S&P 500’s rally marked one of its best days since summer, with the index closing at 6,705.12. The Dow Jones Industrial Average increased by 0.4% to 46,448.27, and the Nasdaq Composite experienced a remarkable 2.7% rise, finishing at 22,872.01.
Market analysts attribute the surge to heightened expectations that the Federal Reserve will implement another interest rate cut at its upcoming meeting in December. Such a move could stimulate economic growth and enhance investment prospects. Stocks related to the artificial intelligence sector also contributed to the upward momentum, with Alphabet gaining 6.3% fueled by positive reception of its new Gemini AI model. Nvidia also benefited, climbing by 2.1%.
The recent volatility in the markets, characterized by sharp fluctuations, reflects investor uncertainty regarding the Fed’s monetary policy and the potential for an artificial intelligence bubble. This uncertainty represents a significant challenge for investors, particularly in the wake of an April sell-off triggered by unexpected tariffs announced by former President Donald Trump.
Despite these challenges, the S&P 500 remains within 2.7% of its record high set last month. Several critical economic indicators are anticipated this week, including a report on wholesale inflation due on November 22. Economists predict a year-on-year increase of 2.6%, unchanged from the previous month. Should the data exceed expectations, it may influence the Fed’s decision-making regarding interest rates, as persistent inflation above its 2% target could complicate rate cuts.
Market participants have shifted their expectations, with current data from CME Group indicating an approximately 85% likelihood that the Fed will reduce rates next month, up from 71% just days prior.
In commodity markets, U.S. benchmark crude oil prices fell by 28 cents to $58.56 per barrel, while Brent crude decreased by 33 cents to $62.39 per barrel. The U.S. dollar weakened slightly against the Japanese yen, trading at 156.81, down from 156.91. The euro also declined, slipping to $1.1517 from $1.1521. Meanwhile, Bitcoin fell by 1.1% to $88,200, significantly down from nearly $125,000 last month.
As investors brace for the upcoming inflation data and the Fed’s policy decisions, the outlook for financial markets remains closely tied to these economic indicators.