Market Rally Driven by Political Breakthrough and Monetary Policy Hopes
Financial markets across Asia experienced a significant upswing on Wednesday, propelled by two major developments: the imminent resolution of the United States government shutdown and increasing expectations for another interest rate cut from the Federal Reserve. This positive sentiment provided a welcome boost to investor confidence, driving gains from Tokyo to Sydney.
The rally was fueled by the passage of a spending bill in the US Senate, a crucial step towards ending the shutdown that began on October 1. The bill now moves to the House of Representatives before heading to President Donald Trump for his signature. Hopes are high that federal services could resume as early as Friday, bringing relief to a million unpaid federal workers and ending disruptions that had threatened food benefits for low-income Americans and caused thousands of flight cancellations.
Economic Data and The Fed's Next Move
Adding to the optimistic mood were fresh signals from the labour market, reinforcing bets that the Fed will enact a third successive rate cut in December. Data from private payrolls firm ADP revealed that US companies shed an average of 11,250 jobs per week in the four weeks ended October 25. This follows a report from Challenger, Gray & Christmas showing US layoffs hit their highest level in 22 years during October.
This softening employment landscape is putting considerable pressure on the Federal Reserve to provide further economic stimulus, even as it remains cautious about persistently high inflation. The prolonged government shutdown had also created a data vacuum, leaving both traders and the Fed without critical information like the October unemployment rate and consumer prices, making informed policy decisions challenging.
Tech Sector Concerns and a Major Stock Sale
Despite the broad rally, not all sectors shared the euphoria. Wall Street had ended on a mixed note, with the tech-heavy Nasdaq dipping slightly. This reflects ongoing investor anxiety about elevated valuations in the technology sector following a breathtaking, AI-fueled rally this year.
These concerns were underscored by news that Japanese tech investment titan SoftBank sold its entire stake in US chip giant Nvidia for a staggering $5.8 billion. The company did not provide a reason for the sale. The announcement sent shockwaves through the market, causing shares in Nvidia to fall by 3 percent and triggering a plunge of as much as 10 percent for SoftBank in Tokyo trading on Wednesday.
Market analysts noted that this shift suggests a potential rotation into industrial sectors, as evidenced by the Dow Jones Industrial Average closing more than 1 percent higher while tech stocks struggled. Fabien Yip, a market analyst at IG, commented, "Valuation concerns have intensified as the index has climbed higher throughout the year. Investors are questioning whether current price levels can be sustained, particularly on stocks boosted by the AI boom."
By the close of the Asian trading session, key indices including Hong Kong's Hang Seng, Tokyo's Nikkei 225, and Shanghai's Composite were all firmly in positive territory, signalling a day of regained optimism for regional investors.
