Asia Set to Continue Risk-on Rally After US CPI Decline: Markets Wrap - Latest Global News

Asia Set to Continue Risk-on Rally After US CPI Decline: Markets Wrap

Stocks in Asia were set to rise on Thursday after U.S. stocks and bonds rose on easing inflation data, giving the Federal Reserve room to cut interest rates.

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(Bloomberg) — Equities in Asia were set to rally Thursday after US stocks and bonds climbed on slowing inflation data, providing room for the Federal Reserve to cut interest rates.

Futures for Australian and Japanese equities rose. The S&P 500 climbed 1.2% and the Nasdaq 100 advanced 1.5% to place each benchmark at fresh highs. Hong Kong shares will resume trading on Thursday after a holiday.

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Wednesday’s Treasury bond gains sent yields lower across the curve. The 10-year Treasury yield fell 10 basis points, while the policy-linked yield on the two-year Treasury note fell nine basis points as investors expressed rate cut expectations. Swap market prices had priced in a fall this year, but that rose to two after Wednesday’s inflation gauge.

The so-called core CPI – which excludes food and energy costs – rose 0.3% from March, in line with consensus expectations but breaking a streak of three readings above forecasts, raising fears that inflation would become entrenched. Year-on-year, the rate cooled to its slowest pace in three years.

“We expect the April reading to be consistent with a direction in inflation dynamics that – in the context of the slowdown in the real economy – may lead to a cut in September followed by a second in December,” Evercore’s Krishna Guha said.

The Bloomberg dollar index fell to a one-month low on Wednesday as the currency weakened against all other developed markets and tracked declines in yields. The yen rose 1% against the greenback to its highest level in almost a week – a level it held early Thursday.

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The latest inflation report could give U.S. policymakers hope that inflation will resume its downward trend, which would pave the way for interest rate cuts. Separate retail sales data suggested some softening in the robust consumer demand that has supported the economy.

“The market likes it,” said Gary Pzegeo of CIBC Private Wealth US. “The news on core inflation was better than expected. Retail sales also showed some slowdown compared to the previously hot consumer sector. Taken together, this supports a Fed rate cut in the fall.”

The next CPI numbers will be released on the exact same day the Fed meets to decide on interest rates – June 12th.

Neel Kashkari, president of the Fed Bank of Minneapolis, reiterated that the central bank will likely need to keep interest rates at current levels “for a while longer” and questioned how much they are slowing the U.S. economy.

In corporate news, Boeing Co. faces possible criminal prosecution after the U.S. Justice Department found the company violated a deferred-prosecution agreement in connection with two deadly crashes half a decade ago. Walt Disney Co. Chief Executive Bob Iger said marketing spending at flagship streaming service Disney+ was too high and would be cut.

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Oil prices rose slightly due to a larger-than-expected decline in commercial crude oil inventories. Gold prices also rose early Thursday, putting the precious metal on track for its third daily rise.

Important events this week:

  • Japan’s GDP, industrial production, Thursday
  • US housing starts, initial jobless claims, industrial production, Thursday
  • Philadelphia Fed President Patrick Harker speaks Thursday
  • Cleveland Fed President Loretta Mester speaks Thursday
  • Atlanta Fed President Raphael Bostic speaks Thursday
  • China property prices, retail sales, industrial production, Friday
  • Eurozone CPI, Friday
  • US conference. Leading board index, Friday

Some of the key moves in the markets:

Shares

  • S&P 500 futures were little changed at 7:29 a.m. Tokyo time
  • Hang Seng futures remained unchanged
  • S&P/ASX 200 futures rose 0.6%

Currencies

  • The Bloomberg Dollar Spot Index fell 0.6%
  • The euro was little changed at $1.0888
  • The Japanese yen rose 0.2% to 154.57 per dollar
  • The offshore yuan was little changed at 7.2164 per dollar
  • The Australian dollar was little changed at $0.6696

Cryptocurrencies

  • Bitcoin rose 0.3% to $66,180.38
  • Ether fell 0.1% to $3,020.05

Tie up

  • Australia’s 10-year yield fell one basis point to 4.32%

raw materials

  • West Texas Intermediate crude rose 0.3% to $78.85 a barrel
  • Spot gold rose 0.1% to $2,388.67 an ounce

This story was produced with support from Bloomberg Automation.

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