ASX 200 Rallies to New High on Rate Cut Bets; Nikkei Gains Despite Yen Strength

US Markets Dip As Tech Stocks Weigh on Sentiment

US equity markets declined on Wednesday, January 29, reversing some of Tuesday’s recovery from the DeepSeek-fueled tech sell-off. Falling bets on an H1 2025 Fed rate cut contributed to Wednesday’s losses.

The Nasdaq Composite Index fell 0.51%, while the Dow dropped by 0.31% and the S&P 500 declined by 0.47%. Nvidia (NVDA) faced another bout of selling pressure, falling 4.10% as AI-related chatter weighed on sentiment.

Fed Chair Powell Dismisses Near-Term Rate Cuts

The US Federal Reserve kept interest rates at 4.5% on January 29, aligned with market expectations. However, Fed Chair Powell sank hopes of a near-term Fed rate cut. The Fed Chair reiterated the central bank’s cautious stance, highlighting that inflation remained elevated.

According to the CME FedWatch Tool, the probability of the Fed keeping rates unchanged in March jumped from 68.5% on January 28 to 83.0% on January 29. The shift reflected the market reaction to Fed Chair Powell’s comments.

ASX 200 Hits Record High on Rate Cut Bets

Australia’s ASX 200 Index advanced by 0.57% on Thursday morning. Rising bets on multiple H1 2025 RBA rate cuts boosted demand for ASX 200-listed stocks. Banking, mining, and tech stocks contributed to the ASX 200 striking a record high of 8,516.

10-year US Treasury yields declined for a fourth consecutive day on Wednesday, driving demand for high-yielding Aussie banks. National Australia Bank (NAB) advanced by 1.27%.

Meanwhile, mining and tech stocks benefited from sentiment toward the RBA rate path. The S&P/ASX All Technology Index added to Tuesday’s gains, rising 0.61%. Mining giants BHP Group Ltd. (BHP) and Rio Tinto Ltd. (RIO) advanced by 1.07% and 0.89%, respectively.

Nikkei Index Steady Despite Yen Strength

Meanwhile, Japan’s Nikkei Index rose 0.11% on Thursday morning despite the USD/JPY dropping by 0.42% to 114.532 in the session. A stronger Yen could affect company earnings and valuations, potentially dampening buyer demand for export-linked stocks. Fed Chair Powell’s positive stance on the US economy bolstered risk sentiment.

Tokyo Electron (8035) gained 1.53%, while Nissan Motor Corp. (7201) rallied 1.85% on plans to reduce US production.

However, Softbank Group (9983) dropped by 1.11% amid speculation over US restrictions on AI-related tech exports.

Hang Seng Closed for Lunar New Year

The Hang Seng Index and Mainland China markets remained closed for the Lunar New Year holidays.

The Hong Kong markets reopen on Monday, February 3, while Mainland China’s markets resume trading on Wednesday, February 5.

Outlook: Risks and Opportunities

Geopolitical tensions, US trade policies, and AI industry developments will be key market drivers in the near term. While tech and AI stocks may continue their rally, trade-sensitive industries like mining could face volatility.

The US administration is considering imposing tariffs on China as early as Saturday, February 1. If China sidesteps new US tariffs and its AI industry continues expanding, Asian markets – particularly Hong Kong, Mainland China, and Australia – could see a strong rally. However, escalating US-China tensions could weigh on risk sentiment.

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