TOKYO — Asian shares surged higher on Wednesday, cheered by a rally on Wall Street that was one of the best days of the year following a surprisingly encouraging report on inflation.
Tokyo’s benchmark Nikkei 225 rose 2.6% to 33,545.14 as investors appeared to shrug off news that Japan’s economy contracted at a worse than expected 2.1% annual rate in July-September.
The world’s No. 3 economy is grappling with weakening private demand from consumers and businesses, slack demand for Japan’s exports and sluggish wage growth that will continue to drag on consumer spending, which is the main driver of the economy, said Marcel Thieliant of Capital Economics.
“Accordingly, we expect GDP growth to slow from 1.7% this year to 0.5% in 2024,” he said in a commentary.
Hong Kong’s Hang Seng added 3.3% to 17,971.81, while the Shanghai Composite gained 0.5% to 3,069.81 after economic data for October showed the Chinese economy is holding up even as some indicators slowed.
Factory output and retail sales rose but property sales fell further. Lending, exports and inflation have also been lower than expected.
Australia’s S&P/ASX 200 jumped 1.4% to 7,105.90. South Korea’s Kospi surged 1.9% to 2,480.51.
Tuesday on Wall Street, the S&P 500 jumped 1.9% for its best day since April and hit a two-month high, closing at 4,495.70. The Dow Jones Industrial Average rallied 1.4% to 34,827.70, while the Nasdaq composite charged 2.4% higher to end at 14,094.38.
The highly anticipated inflation report showed not only that overall price increases slowed last month, raising the odds the Federal Reserve may refrain from further market-crunching interest rate hikes.
Such hopes lifted all kinds of investments, and more than 90% of the stocks in the S&P 500 climbed in a widespread rally.
Technology and other high-growth stocks tend to get some of the biggest boosts from easier rates, and a 2.3% rise for Amazon and 2.1% lift for Nvidia were two of the strongest forces pushing the S&P 500 upward.
Stocks of smaller companies, which often borrow to stay in business, also got a huge boost, with the Russell 2000 index of small stocks surging 5.4% for its best day in a year.
The Fed has yanked its main interest rate to its highest level since 2001, up from virtually zero early last year, in hopes of getting inflation back down to 2%.
The yield on the 10-year Treasury tumbled to 4.44% from 4.64% late Monday, which is a significant move for the bond market. Just a few weeks ago, the 10-year yield was above 5% and at its highest level since 2007.
The prospect of no more rate hikes reverberated across all kinds of financial markets.
The value of the U.S. dollar fell against many other currencies, further slowing its strong run since the summer, while the price of gold rose $16.30 to settle at $1,966.50 per ounce.
On Wall Street, real-estate stocks and others beaten down particularly hard by higher rates soared to some of the market’s biggest gains.
Alexandria Real Estate Equities jumped 11.7%, for example. It owns mega campuses catering to life sciences companies in hubs around the country.
Real-estate investment trusts send out most of their earnings to investors as dividends, which means they typically compete with bonds for the same kind of investors. When rates are rising and bonds are paying higher yields, those investors often turn away from REITs, utility companies and other high-dividend stocks.
Bank stocks were also strong on hopes that a halt to rate hikes will mean less pressure on the financial system. Zions Bancorp jumped 8.1%, and Comerica rose 7.8%. Both their stock prices fell sharply earlier this year following the collapses of Silicon Valley Bank and other banks a tier or two below in size of the industry’s behemoths.
Elsewhere on Wall Street, Home Depot rallied 5.4% after reporting stronger profit for the latest quarter than analysts expected.
In energy trading, benchmark U.S. crude gained 37 cents to $78.63 a barrel in electronic trading on the New York Mercantile Exchange. It was unchanged on Tuesday. Brent crude, the international standard, picked up 43 cents to $82.90 a barrel.
In currency trading, the U.S. dollar rose to 150.70 Japanese yen from 150.37 yen. The euro cost $1.0874, little changed from $1.0881.