Muted Trading Amid Fed’s Hawkish Hold

Asian markets traded within a narrow range on Thursday as investors processed the Federal Reserve’s decision to hold interest rates steady while signaling a hawkish outlook on future rate changes. Sticky inflation in the U.S. further added to market caution.

Australia Outperforms with Record Highs

Australia’s ASX 200 surged 0.8%, reaching a record high of 8,515.70 points. The rally was fueled by expectations of a February rate cut from the Reserve Bank of Australia (RBA), driven by softer-than-expected Q4 inflation data. Analysts at ANZ and Westpac anticipate a 25-basis-point cut in the RBA’s upcoming meeting, though core inflation exceeding the RBA’s target range raises uncertainties.

Caution Over AI and U.S. Trade Policy

Tech shares in Japan struggled as concerns around artificial intelligence investments deepened. SoftBank Group Corp. extended its decline, falling over 1% amid news of a planned $25 billion investment in OpenAI. The sentiment in tech was further dampened by China’s DeepSeek R1 AI model, which claimed to deliver competitive performance at lower resource costs, unsettling global tech markets.
Meanwhile, uncertainty loomed over U.S. President Donald Trump’s potential trade tariffs, expected to materialize soon, keeping investors on edge.

Regional Markets React to Lunar New Year Closures

Trading volumes in Asia were subdued due to Lunar New Year holidays in China, Hong Kong, Singapore, Taiwan, and South Korea. Chinese markets are closed for the rest of the week, limiting regional activity.

Wall Street Cues and Mixed Earnings

Asian markets took a weak lead from Wall Street, which ended lower after the Federal Reserve’s hawkish comments. Mixed earnings from Microsoft and Tesla added to the uncertainty, with Microsoft reporting softer-than-expected performance in its Azure cloud unit.