Hang Seng Pauses, Nikkei and ASX 200 Gain on Market Tailwinds

US Markets Recover as Dip Buyers Step In

US equity markets rebounded on Tuesday, January 28, after Monday’s DeepSeek-fueled tech meltdown. The Nasdaq Composite Index rallied 2.03%, while the Dow added 0.31% and the S&P 500 gained 0.92%.

Notable movers included Nvidia (NVDA), which jumped 8.93%, reflecting investor confidence in US AI-linked stocks. NVDA had tumbled 16.97% on Monday as markets reacted to the DeepSeek news.

US Consumer Sentiment Declines, Strengthening Dovish Fed Outlook

The US CB Consumer Confidence Index unexpectedly fell from 109.5 in December to 104.1 in January, supporting a more dovish Fed rate path. A drop in consumer sentiment may curb spending, easing inflationary pressures. A more dovish Fed stance could lower borrowing costs, supporting company earnings and valuations.

Aussie Inflation Green Lights RBA Rate Cut

On Wednesday, January 29, Aussie inflation figures fueled bets on a February Reserve Bank of Australia (RBA) rate cut. The all-important RBA Trimmed Mean CPI increased by 3.2% year-on-year in Q4 2024, down from 3.6% in Q3 2024. The inflation rate neared the RBA’s 2-3% target range, a crucial factor for monetary policy easing.

AMP Head of Investment Strategy and Chief Economist Shane Oliver remarked on the Q4 numbers and RBA rate path, stating,

“Aust Dec qtr CPI +0.2%qoq/2.4%y, trimmed mean +0.5%q/3.2%y. This was in line with our forecasts but< RBA & mkt. Trimmed mean was 2%annualised in Dec qtr & 2.7%annualised for last 6 mths. Dec Mthly trimmed mean slowed to 2.7%y. Expect RBA to cut in Feb & in May. Money mkt prob is 91%.”

Notably, a more dovish RBA rate path boosted demand for ASX 200-listed stocks.

ASX 200 Gets Inflation Relief

Australia’s ASX 200 Index gained 0.89% on Wednesday morning amid expectations of multiple H1 2025 RBA rate cuts. Banking and tech stocks led the gains, while gold and oil stocks rebounded from Monday’s reversals. The S&P/ASX All Technology Index rallied 1.87%.

10-year US Treasury yields declined for a third consecutive day on Tuesday, driving demand for high-yielding Aussie banks.

Meanwhile, gold and oil prices rebounded, lifting Northern Star Resources (NST) by 1.01% and Woodside Energy Group (WDS) by 1.78%.

Nikkei Index Advances on Yen Weakness

Meanwhile, Japan’s Nikkei Index advanced by 0.55% on Wednesday morning, buoyed by USD/JPY gains. A weaker Japanese Yen could improve company earnings and valuations, driving buyer demand for export-linked stocks.

Sony Corp. (6758) rallied 4.65%, while Softbank Group (9984) stabilized after Tuesday’s tech sector rout, rising 0.05%.

Hang Seng Pauses for Lunar New Year

There was no trading on the Hang Seng Index or Mainland China markets, which were 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 Ahead

Geopolitical tensions, US trade policies, and AI industry developments will be key drivers of market sentiment. While tech and AI stocks may continue their bullish momentum, trade-sensitive industries like mining could face volatility.

If China avoids tariffs and its AI industry expands, markets in Hong Kong, Mainland China, and Australia may see a strong rally. However, escalating US-China trade tensions could weigh on risk sentiment, potentially offsetting AI-driven stock gains. On Tuesday, January 28, the White House reportedly said that US President Trump was still considering tariffs on China.

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