Investing.com — Most Asian stocks rose on Thursday amid growing optimism about lower U.S. interest rates, but overall gains were limited as a downward revision to employment data rattled markets.
Japanese shares were the day's best performer after purchasing managers' index data showed continued growth in the country's services sector, but China lagged and gains in most other Asian markets were limited.
Regional markets received a moderately positive lead from Wall Street after the Federal Reserve's late July meeting indicated more policymakers were in favor of cutting interest rates, strengthening expectations of a rate cut in September.
In Asian markets, U.S. stock index futures were flat, but optimism over a rate cut was offset by data showing a sharp downward revision in U.S. employment data for the year to March 2024, raising concerns that a slowing labor market could lead to a potential recession in the world's largest economy.
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Japanese stocks thrive on strong service sector PMI
Japan's stock index and its main stock index rose 0.8 percent and 0.4 percent respectively, the best performance in Asia.
Sentiment towards Japan was lifted by PMI data which showed notably stronger growth for the second consecutive month as rising wages boosted domestic demand.
Although Japan contracted more than expected, overall business activity continued to expand.
The strength of Japan's economy raises the possibility of further interest rate hikes by the Bank of Japan this year, which could create headwinds for the domestic market, but stocks tied to domestic demand are expected to benefit from the trend.
Economic data due to be released on Friday is expected to provide further indications about the economy.
China lags behind, and overall Asian market activity slows
Gains across Asian markets were narrowed significantly as fresh concerns over a US economic slowdown tempered optimism about interest rate cuts.
There were few signs of improvement in sentiment towards China, with China indexes down 0.3% and 0.1%, respectively, both hitting their lowest levels in six months.
Hong Kong's stock index was recovering from a bigger drop the previous day, but rose 0.6 percent thanks to a rebound in heavyweight technology and e-commerce stocks.
South Korea's interest rates remained unchanged as the central bank kept them on hold as expected, citing the need to curb inflation, despite growing views that a rate cut would eventually be necessary amid a softening economic outlook.
Australia rose 0.2% while Indian index futures opened slightly negative with the index facing resistance near the 25,000 level.
