Japan's Nikkei smashes past 42,000 mark to all-time highs as Asia markets rally on rate cut optimism

Japan's Nikkei 225 crossed the 42,000 mark for the first time amid a broader rise in Asia-Pacific markets on Thursday, after U.S. Big Tech rallied overnight on optimism over Federal Reserve rate cuts.

The Nikkei rose 0.94% to close at 42,224.02, powered by technology stocks, while the broad-based Topix gained 0.69% to 2,929.17.

On a year-on-year basis, core machinery orders in Japan climbed 10.8%, higher than a Reuters forecast of a 7.2% rise.

Core machinery orders, however, unexpectedly fell for a second straight month on a month-on-month basis, slipping 3.2% compared to the 0.8% rise expected by economists polled by Reuters.

Machinery orders are a volatile, yet leading indicator of capital spending in Japan, and a fall could indicate a fragile economy, complicating the Bank of Japan's plans to normalize monetary policy.

Japanese automaker Toyota received a boost in India after the state of Uttar Pradesh waived some levies on hybrid cars, making them 10% cheaper, Reuters reported.

South Korea's Kospi rose 0.81% to ended at 2,891.35 as the Bank of Korea held rates at 3.5% for the 12th time in a row, but the Kosdaq was 0.71% down at 852.42.

Australia's S&P/ASX 200 rose 0.93% to end the day at 7,889.6, hitting its highest closing level since March.

Hong Kong Hang Seng index popped 1.96%, while the mainland Chinese CSI 300 index climbed 1.14% and finished at 3,468.17

Overnight in the U.S., all three major indexes rose, with both the S&P 500 and Nasdaq Composite gaining 1.02% and 1.18% respectively.

The gains also meant that the S&P broke above the 5,600 mark for the first time, marking its 37th record close in 2024. The Nasdaq saw its 27th record close this year.

The Dow Jones Industrial Average added 1.09%.

Chip stocks were among the biggest winners of the U.S. trading session. U.S.-listed shares of Taiwan Semiconductor Manufacturing Company added 3.5% after revenue from April to June came in ahead of Wall Street estimates.

Peer chip firm Qualcomm ticked higher by 0.8%, and Broadcom rose about 0.7%. Artificial intelligence darling Nvidia climbed 2.7%.

Gains were also fueled by rate cut hopes, with expectations from Dow Jones indicating that the June inflation rate would come in 3.1% year over year, lower than the 3.3% rise seen in May.

The core inflation rate, which strips out more volatile food and energy prices, is expected to rise 3.4% since June last year. In May, CPI was up 3.3% on an annual basis.

—CNBC's Brian Evans, Samantha Subin and Jesse Pound contributed to this report.