Asian stocks followed gains in US equities after the American inflation rate slid to a two-year low, easing pressure on global markets from rising interest rates in the world’s biggest economy.
An Asian share gauge headed for the highest close in more than three weeks, supported by gains in Hong Kong, Japan and Australia. Sony Group Corp. climbed as much as 5.1% in Tokyo after Goldman Sachs Group Inc. upgraded its recommendation to buy from neutral. US stock futures rose.
Technology stocks in Hong Kong rallied for a fourth day after Chinese Premier Li Qiang met with senior executives from the country’s leading technology firms on Wednesday. The news added to optimism the government is ending its crackdown on the industry amid a weakening economy.
A gauge of the dollar added to Wednesday’s 0.9% drop to fall to the lowest in over a year. The yen was little changed after surging 1.3% versus the dollar the previous day, while the offshore yuan fell. Emerging market currencies rallied, with the South Korean won leading the gains.
Some top money managers said the greenback is poised for further losses as US exceptionalism wanes.
“Broadly we would probably assume that the US dollar has had its peak and there might be room for other currencies to perform better in the latter half of 2023-2024,” said Brad Gibson, co-head of Asia Pacific fixed income at AllianceBernstein.
Treasury yields extended declines in Asian hours. The yield on two-year Treasuries, which is more sensitive to imminent policy moves, dropped four basis points to 4.71% after sliding 13 basis points Wednesday on the inflation data.
Australia’s three-year yields declined 10 basis points. New Zealand’s government bond yields also fell.
Receding Likelihood
The US consumer price index slid to 3% in June year-on-year, down from 4% in May. The core measure — which economists view as the better indicator of underlying inflation — dropped to 4.8%, the lowest since 2021. While traders predict 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 its highest close since April 2022. The tech-heavy Nasdaq 100 outperformed, jumping 1.2%.
Brandywine Global Investment Management expects the Fed to tighten by 25 basis points this month and then pause. “We’ve moved beyond that sort of crisis mentality around inflation,” portfolio manager Jack McIntyre told Bloomberg Television. “The rhetoric coming from the Fed post-FOMC should be a lot less hawkish.”
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.
Elsewhere, oil held gains on optimism that the Fed’s rate hike 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 0.2% as of 11:34 a.m. Tokyo time. The S&P 500 rose 0.7%
- Nasdaq 100 futures rose 0.3%. The Nasdaq 100 rose 1.2%
- Japan’s Topix index rose 1%
- Hong Kong’s Hang Seng Index rose 2.3%
- China’s Shanghai Composite Index rose 0.8%
- Australia’s S&P/ASX 200 Index rose 1.4%
Currencies
- The Bloomberg Dollar Spot Index was little changed
- The euro rose 0.1% to $1.1141
- The Japanese yen was little changed at 138.59 per dollar
- The offshore yuan fell 0.2% to 7.1784 per dollar
- The Australian dollar rose 0.2% to $0.6798
Cryptocurrencies
- Bitcoin was little changed at $30,369.28
- Ether was little changed at $1,872.77
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 seven basis points to 4.06%
Commodities
- West Texas Intermediate crude rose 0.2% to $75.93 a barrel
- Spot gold rose 0.1% to $1,959.33 an ounce
This story was produced with the assistance of Bloomberg Automation.
--With assistance from Rita Nazareth, Ruth Carson and Malavika Kaur Makol.
