(Bloomberg) — Stocks in Asia rose as Taiwan Semiconductor Manufacturing Co.’s outlook fueled hopes for a global recovery in the sector, aiding sentiment as traders look for clues on the US central bank’s next steps.
A regional shares gauge headed for its best day in more than three weeks, supported by strong gains in semiconductor stocks. Benchmark indexes rose in Japan, South Korea and Australia. TSMC jumped more than 5% in Taiwan after its American depository receipts surged almost 10% to close at the highest since February 2022.
TSMC, the main supplier of chips to Apple Inc. and Nvidia Corp., sees a return to solid growth this quarter as it moves ahead with plans for plants in Japan, Arizona and Germany amid growth fueled by the boom in artificial intelligence development. Its earnings spurred the biggest rally in chipmakers in more than a month on Thursday and pushed the tech-heavy Nasdaq 100 index to close at an all-time high.
“The better-than-expected results from TSMC could be positive signals on demand recovery,” said An Hyungjin, chief executive officer and fund manager at Billionfold Asset Management Inc. “With strong AI demand, not only the US big tech firms but also most tech firms around the world have to invest in AI and that could be good news to stock markets.”
Shares in mainland China declined after making a late turnaround on Thursday. Contracts for US equities were little changed in Asia trading.
Treasuries and the dollar slipped after frenetic repricing earlier in the week of the outlook for Federal Reserve interest-rate policy. Traders now see the prospect of a rate cut in March at little more than a coin toss, down from almost 80% at the end of last week after hawkish Fed commentary and data indicating the American consumer remains resilient.
The yen was little changed following the release of Japanese inflation data that showed a deceleration in December. That provides the Bank of Japan with another reason to wait beyond next week’s board meeting before ending its negative rate policy.
Disconnect
Fed Bank of Atlanta President Raphael Bostic urged policymakers to proceed cautiously given the potential impacts of unpredictable events from elections to global conflicts. His Philadelphia counterpart Patrick Harker said he expects inflation to keep ebbing toward the target.
The disconnect between the incoming data and the price action continues to present challenges in navigating the US rates market, according to Ian Lyngen and Benjamin Jeffery, rates strategists at BMO Capital Markets.
“It comes as little surprise that January’s price action has been choppy – it’s not that there is a lack of conviction, it is just not one that is universally held,” they wrote in a note. “As the data continues to build in favor of no March cut, it will be notable to gauge the response in the shape of the curve.”
Meanwhile, the S&P 500 has stalled in recent days, sitting less than half a percent below its closing record set two years ago. Goldman Sachs Group Inc. says it’s still biased toward being long risk and short volatility thanks to an expectation of “friendly macro dynamics” this year, but added that some protection may be worth implementing as the market is pricing closely to the firm’s “benign” view.
“it makes sense to take advantage of low equity implied volatility to add hedges that allow investors to stay long or to add risk when the market worries,” strategist Vickie Chang wrote in a note Thursday.
Elsewhere, oil was steady after closing at a three-week high on escalating tensions in the Middle East, with the US and the Iranian-backed Houthis trading tit-for-tat strikes that have upended the global shipping market. Gold headed for a weekly loss on the recalibration of Fed rate-cut bets.
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Some of the main moves in markets:
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This story was produced with the assistance of Bloomberg Automation.
–With assistance from Matthew Burgess and Youkyung Lee.
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