US Stock Futures Rise Driven by Gains in the Technology Sector

SadaNews - US stock futures rose in Asian trading as strong earnings from tech giants fueled optimism about the sustainability of profits. The dollar gave up some of the gains it made following the Federal Reserve's decision to keep interest rates unchanged.

Nasdaq 100 futures increased by 1.3%, while S&P 500 futures rose by 0.9%, following sharp gains in shares of Microsoft and Meta Platforms in post-market trading.

Conversely, Asian stocks fell by 0.3%, amid mixed performance in regional markets, with Korean stocks fluctuating after a trade deal was announced with the United States, while Japan's Nikkei 225 index increased by 0.9% ahead of a decision from the Bank of Japan. Chinese indices declined following weak factory activity data.

Copper on the London Stock Exchange rose by 1.2% before trimming its gains, after a previous drop in New York, following President Donald Trump's announcement to exempt the most traded forms of copper from impending tariffs.

Investors took advantage of a flood of major news on Wednesday, ranging from trade tensions and central bank decisions to a wave of corporate earnings.

U.S. Treasury bonds fell and the dollar rose on Wednesday as markets backtracked on their expectations for a rate cut in September.

Results Justify Spending on Artificial Intelligence

Significant trade developments in India, South Korea, and Canada caught attention ahead of the August 1st tariff deadline, coinciding with strong results from tech giants.

Gary Tan, a portfolio manager at Allspring Global Investments in Singapore, said: "Despite the reduced expectations of a rate cut after the Fed meeting, strong results and performance from tech companies like Meta and Microsoft have boosted confidence in the AI-supported growth narrative," adding that strong performance "continues to justify heavy spending on advanced tech equipment."

Shares of Microsoft rose more than 8% in after-hours trading, while Meta surged over 11%.

The Dollar and Bonds Under Scrutiny

The dollar index fell by 0.1% on Thursday. The dollar had risen after Federal Reserve Chairman Jerome Powell stated that no decision had been made regarding easing monetary policy in September.

Powell remarked that the U.S. labor market "looks strong," while inflation remains above the target level. Treasury bonds rose across the curve on Thursday after a decline in the previous session.

Brett Kenville from eToro said: "For a rate cut to occur, the Fed will need to be confident that inflation increases will be temporary and contained or that inflation will continue to trend downward in the coming months and quarters."

Trump Announces Trade Agreements and Imposes New Tariffs

In related news, Trump announced that he has reached a trade deal with South Korea that imposes a 15% tariff on its exports to the United States, which includes Seoul's commitment to invest $350 billion in America.

He also announced that he will impose a 25% tariff on India's exports to the U.S. starting Friday and threatened additional sanctions over India's purchases of Russian energy. The struggling Indian stock market faces risks of further losses.

Meanwhile, copper rose by up to 1.2% on the London Metal Exchange before the industrial metal trimmed some of its gains.

Earlier this year, the U.S. president hinted at potential tariffs, leading to a spike in copper prices in the U.S. compared to the rest of the world, triggering a rush to ship copper to the United States to avoid tariffs.

Awaiting the Bank of Japan's Decision

Elsewhere in Asia, investors are focused on the Bank of Japan's interest rate decision, which is expected to keep rates unchanged. The yen strengthened by 0.1% to trade at 149.29 against the dollar.

Mark Cranfield, a Markets Life analyst, noted that "the ruling Liberal Democratic Party needs to discuss the fate of Prime Minister Shigeru Ishiba, which likely means that Bank of Japan Governor Kazuo Ueda will take a cautious tone today."

He added that this will lead to a decline in the yield curve on Japanese government bonds, with inflation remaining high and the central bank lagging in its response. Traders see a 77% chance of a rate hike by the Bank of Japan's meeting in December.

The Fed Keeps Interest Rates Unchanged

Meanwhile, the Federal Open Market Committee voted 9-2 on Wednesday to keep the federal funds rate in the range of 4.25%-4.5%, as has been the case in all its meetings this year. Governors Christopher Waller and Michelle Bowman voted against the decision in favor of a 25 basis point cut.

Financial markets have reduced their bets on a rate cut this year, as traders now see a lower than 50% chance of a cut in September. October's cut probabilities decreased to about 85%, having been fully priced in before Powell's remarks began.

Ashish Shah of Goldman Sachs Asset Management stated, "The next two months' data will be pivotal, and we see a path to resuming the Fed’s easing cycle in the fall if higher inflation is proved to be less than expected or signs of weakness emerge in the labor market."

Technology Bets Pay Off

Regarding tech company earnings, the standout conclusion is that massive capital spending is starting to pay off, according to Chris Weston, head of research at Pepperstone Group in Melbourne. He added that most Asian tech stocks advanced.

He said: "We are starting to see signs that this bet is paying off, and in a very fragmented way."