Market risk appetite rises ahead of major events this week, Asian stock markets surge
Ahead of several major events this week, the rebound in market risk appetite has driven Asian stock markets to rise broadly. The Japanese stock market performed outstandingly, with the Nikkei Index rising by 0.77%, reaching a record high; the Chinese stock market also showed strong performance, with the Shanghai Composite Index hitting a nearly 10-year high. Optimism about the outlook for Japanese companies has reignited, and the weakening yen further boosted the stock market. Investors are focused on the upcoming important events, including the meeting between U.S. President Trump and European leaders, as well as a speech by Federal Reserve Chairman Powell
According to Zhitong Finance APP, as the market's risk appetite rebounds ahead of several major events this week, Asian stock markets saw broad gains on Monday. Notably, the Japanese and Chinese stock markets performed exceptionally well. In Japan, the Nikkei Index rose by 0.77% to 43,714.31 points; the Topix Index increased by 0.43% to 3,120.96 points. Both of these Japanese stock benchmarks closed at record highs for the second consecutive trading day. In China, the Shanghai Composite Index reached a nearly 10-year high, the Beijing Stock Exchange 50 hit an all-time high, and both the Shenzhen Component Index and the ChiNext Index surpassed their peaks from October 8 of last year. The total trading volume in the Shanghai and Shenzhen markets exceeded 2.7 trillion yuan, setting a new annual high.
Additionally, as of the time of writing, India's SENSEX 30 Index rose nearly 1%, Taiwan's Weighted Index increased by 0.61%, the FTSE Malaysia Index was up 0.55%, and the Vietnam Index gained 0.39%.
It is worth mentioning that as the impact of U.S. tariffs becomes clearer, optimism about the prospects of domestic Japanese companies has reignited, leading to a rebound in Japanese stocks since entering August. In addition to the Dow Jones Index reaching an intraday high last Friday, boosting market risk appetite, the weakening yen was also a significant factor in the continuation of last week's gains in Japanese stocks on Monday. On Monday, the yen fell about 0.2% against the U.S. dollar. A weaker yen often boosts the stock prices of companies that primarily earn export revenues, as it increases the value of overseas profits when converted back to yen. As a result, Toyota and Honda saw their shares rise by 1.72% and 1.56%, respectively. Furthermore, Fast Retailing, the parent company of Uniqlo, rose by 1.44% on Monday, making it the largest single stock contributor to the Nikkei Index.
Seiichi Suzuki, chief market analyst at Tokai Tokyo Research Institute, stated, “The domestic stock market in Japan has maintained its momentum since last week.” “People expect foreign investors to continue buying Japanese stocks.”
Investors will face numerous events this week. U.S. President Trump will meet with Ukrainian President Zelensky and other European leaders later on Monday to discuss the next steps. Trump met with Russian President Putin in Alaska last Friday.
Moreover, the most significant event this week will be Federal Reserve Chairman Powell's speech on Friday at the Jackson Hole annual economic symposium. Market participants will look for signals regarding the Fed's policy outlook from Powell's remarks.
In this regard, Andrew Hollenhorst, chief economist at Citigroup Research, stated, “Powell may hint that the risks to employment and inflation targets are becoming more balanced, paving the way for the Fed to restore policy rates to neutral.” “However, Powell will not explicitly signal a rate cut in September but will wait for the August employment and inflation reports. This is essentially a neutral impact for the market, as it has fully priced in a rate cut in September.”
In the U.S. stock market, the second-quarter earnings season is still ongoing. With a robust earnings season supporting recent gains in U.S. stocks, expectations for a Fed rate cut and the earnings reports from several retailers expected this week will likely shape the U.S. stock market's trajectory. Investors will gain more insights into consumer spending health from the earnings reports of retailers such as Home Depot (HD.US), Target (TGT.US), Lowe's (LOW.US), and Walmart (WMT.US)
