(Jan 24): Asian shares climbed on Tuesday (Jan 24) following gains on Wall Street amid strength in technology stocks and bets for less-aggressive rate hikes from the Federal Reserve.

A benchmark of Australian equities inched higher and Japan’s Topix index rallied more than 1% while many other markets in the region remained closed for Lunar New Year celebrations. The positive tone for riskier assets was carried over from the US on Monday, when the tech-heavy Nasdaq 100 had its best two-day rally since November and the S&P 500 extended its surge to 12% from an October low. 

Shares in New Zealand rose about 0.3% as investors continued to look positively at the country’s incoming prime minister Chris Hipkins, who has pledged to prioritise the economy. Australian and New Zealand bonds fell, echoing moves in Treasuries overnight. US yields were little changed in early Asian trading.

The Australian dollar held gains from Monday while the yen steadied after dropping, reflecting ebbing demand for havens and the low level of Japanese yields versus those of other developed economies. Japanese bond futures fell after a week-long stretch of gains.

With key centres including Hong Kong, Shanghai, Singapore and Seoul closed, much of the focus among global investors Tuesday is on central banks and US corporate earnings. Marquee names like Microsoft Corp and Intel Corp report results this week that will help shape the outlook for the technology sector. 

Some traders are bracing for the group’s worst earnings slump since 2016 while others have been encouraged by cost cuts and inflation shows signs of easing.

“Markets have leapt ahead this year, driven by China’s reopening, falling energy prices and slowing inflation,” strategists at BlackRock Investment Institute wrote. “This has spurred hopes of a soft economic landing, plummeting inflation and interest rate cuts. We see markets vulnerable to negative surprises — and unprepared for recession.”

Optimism around a less hawkish Federal Reserve, China’s reopening and a weaker US dollar is already priced in, according to Morgan Stanley’s strategist Michael Wilson. Nevertheless, he does expect a stock rally in 2024 following a challenging 2023 as the US economy suffers through an earnings recession.

Markets have priced in a smaller 25-basis-point hike at the Fed’s Jan 31-Feb 1 meeting. Even as several officials say rates must peak above 5% and stay higher for longer, traders remain sceptical. 

Meantime, Treasury Secretary Janet Yellen said she’s encouraged by progress on inflation, with energy prices and supply-chain issues easing across the globe even as the US labour market remains strong.

Elsewhere in markets, oil steadied as traders awaited fresh signals on the state of Chinese crude demand after the nation ditched Covid curbs.

Gold reversed losses, with traders awaiting more US data that may shed light on the path of Fed rate hikes.

Some of the main moves in markets: