Asian Shares Gain On Fed Optimism, China's Surprise Rate Cut

Asian stocks advanced on Tuesday as China’s central bank lowered a short-term lending rate for the first time in 10 months and investors braced for central bank meetings in the United States, Europe and Japan.

Tech shares posted significant gains after a Wall Street Journal report said that the U.S. would let semiconductor manufacturers from South Korea and Taiwan to continue and expand their chip-making operations in China.

The U.S. dollar edged lower and the benchmark 10-year U.S. Treasury bond yield fluctuated between 3.7 percent and 3.75 percent as investors awaited the release of U.S. CPI data for May later in the day and the Federal Reserve’s highly anticipated policy decision scheduled on Wednesday.

Amid signs of cooling inflation, the Fed is expected to pause its interest rate hike campaign for the first time in 15 months.

Chinese shares fluctuated before ending slightly higher as the country’s central bank cut short-term borrowing costs to boost growth.

The benchmark Shanghai Composite Index edged up 0.2 percent to 3,233.67 ahead of a slew of Chinese data due later in the week. Hong Kong’s Hang Seng Index rose 0.6 percent to 19,521.42.

Japanese shares led regional gains on Fed pause hopes and expectations of more Chinese stimulus. The Nikkei 225 Index jumped 1.8 percent to 33,018.65 on expectations that the Bank of Japan will stick to its dovish stance on Friday. The broader Topix closed 1.2 percent higher at 2,264.79.

Technology stocks followed their U.S. peers higher, with Advantest and Tokyo Electron both surging around 5 percent.

Technology investment house SoftBank Group soared 5.3 percent after Reuters reported that chipmaker Intel was in talks to be an anchor investor in the initial public offering of Softbank’s chip designing unit, Arm.

Seoul stocks eked out modest gains, with the Kospi closing up 0.3 percent at 2,637.95. Chipmakers Samsung Electronics and SK Hynix rallied 1.4 percent and 4.1 percent, respectively.

Retail and cosmetic shares underperformed due to escalating tensions between Seoul and Beijing.

Australian markets ended modestly higher as traders returned to their desks after a long holiday weekend. The benchmark S&P/ASX 200 Index inched up 0.2 percent to 7,138.90, with tech and healthcare stocks leading the uptick. The broader All Ordinaries Index settled 0.2 percent higher at 7,329.10. Pro Medicus, Xero, WiseTech soared 4-5 percent.

Across the Tasman, New Zealand’s benchmark S&P/NZX-50 Index rose 0.3 percent to 11,652.84.

U.S. stocks advanced overnight as investors braced for CPI data and the Federal Reserve policy decision.

The tech-heavy Nasdaq Composite and the S&P 500 gained 1.5 percent and 0.9 percent, respectively, to reach their best closing levels in over a year, while the Dow rose 0.6 percent.

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