Asian equities rose Thursday after US inflation slid to a two-year low, easing pressure on global markets from rising interest rates in the world’s biggest economy.
(Bloomberg) — Asian equities rose Thursday after US inflation slid to a two-year low, easing pressure on global markets from rising interest rates in the world’s biggest economy.
Stocks opened higher in Australia and South Korea. Japanese shares were mixed as the Nikkei 225 gauge showed a small gain while the broader Topix measure inched down.
The relative underperformance in Tokyo in part reflected the drag from the recent rebound of the yen. Sony Group Corp. shares shone, climbing as much as 3.4% after Goldman Sachs Group Inc. upgraded its recommendation on the shares to buy from neutral.
Futures for benchmark in Hong Kong pointed to strong opening gains and an index of US-listed Chinese stocks rallied more than 3%, setting the scene for Chinese equities to lead the region on Thursday.
Treasury yields were little changed in early trading in Asia. The yield on the two-year Treasury, which is more sensitive to imminent policy moves, had slid 13 basis points Wednesday after the inflation data.
Australia’s three-year sovereign bonds slumped more than 10 basis points. New Zealand’s government bond yields also fell.
A gauge of dollar strength inched lower after dropping almost 1% in the previous session to the lowest in more than a year. The yen strengthened to around 138.20 versus the greenback after its biggest advance in around four months.
The US consumer price index rose 3% in June from a year ago. The core measure — which economists view as the better indicator of underlying inflation — advanced just 4.8%, the lowest since 2021. While traders expect the Federal Reserve will still go ahead with one more rate hike this month, the likelihood of further increases appears to be receding.
The inflation data propelled the S&P 500 to finish at its highest since April 2022 Wednesday. The tech-heavy Nasdaq 100 outperformed with a jump of 1.2%.
Cooling inflation and slowing but non-recessionary growth should be moderately friendly for risk assets and conducive to lower volatility, according to strategists at Goldman Sachs.
“We also think that it should reduce multi-asset portfolio frustration as it lowers the risk of 60/40 drawdowns, though the upside for 60/40 portfolios is likely to still be limited due to relatively elevated risk appetite and the late-cycle environment,” the strategists, including Jenny Grimberg, wrote in a note.
In corporate news, Meta Platforms Inc. and Nvidia Corp. led gains in megacaps. Domino’s Pizza Inc. jumped on a third-party ordering agreement with Uber Technologies Inc. Microsoft Corp. is set for a second shot at winning UK approval for its takeover of Activision Blizzard Inc., but regulators warn that any antitrust fixes would trigger a new probe.
Investors will also be monitoring trade data from China later Thursday. It may reinforce calls for more policy support for the economy, according to Eric Zhu at Bloomberg Economics.
Another positive sign for investors came when Chinese Premier Li Qiang met with senior executives from the country’s leading technology firms on Wednesday, heightening speculations that the government is ending its crackdown on the industry amid a weakening economy.
The Bank of Korea is widely expected to keep interest rates unchanged at a meeting later on Thursday. That would be the fourth straight meeting with the BOK standing pat, which has supported South Korea’s Kospi stocks benchmark. The index has gained about 15% this year while the won has fallen around 1.8%.
Elsewhere, oil held gains on optimism that the Fed’s rate hiking cycle is nearing an end. Gold was little changed.
Key events this week:
- China trade, Thursday
- Eurozone industrial production, Thursday
- US initial jobless claims, PPI, Thursday
- US University of Michigan consumer sentiment, Friday
- US banks kick off earnings, Friday
Some of the main move in markets:
Stocks
- S&P 500 futures rose 0.1% as of 9:20 a.m. Tokyo time. The S&P 500 rose 0.7%
- Nasdaq 100 futures rose 0.2%. The Nasdaq 100 rose 1.2%
- Hang Seng futures rose 1.9%
- Japan’s Topix was little changed
- Australia’s S&P/ASX 200 rose 1.3%
Currencies
- The Bloomberg Dollar Spot Index was little changed
- The euro rose 0.1% to $1.1142
- The Japanese yen rose 0.2% to 138.17 per dollar
- The offshore yuan was little changed at 7.1646 per dollar
- The Australian dollar rose 0.1% to $0.6794
Cryptocurrencies
- Bitcoin rose 0.2% to $30,418.9
- Ether was little changed at $1,874.15
Bonds
- The yield on 10-year Treasuries was little changed at 3.85%
- Japan’s 10-year yield declined one basis point to 0.465%
- Australia’s 10-year yield declined nine basis points to 4.04%
Commodities
- West Texas Intermediate crude rose 0.1% to $75.83 a barrel
- Spot gold was little changed
This story was produced with the assistance of Bloomberg Automation.
–With assistance from Rita Nazareth.
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