Asian Stocks Edge Higher as CPI Calms Wall Street: Markets Wrap

Article content

(Bloomberg) — Asian equities edged higher early Thursday after in-line US inflation data calmed market jitters on Wall Street as traders prepare for Federal Reserve rate cuts next month.

Shares in Japan rose after economic growth data exceeded forecasts, while stocks in Australia also advanced. The S&P 500 closed 0.4% higher Wednesday, while the Nasdaq 100 added 0.1%, after year-on-year core consumer prices, which excludes food and energy costs, increased at the slowest pace since early 2021.

Article content

The inflation print bolstered forecasts for a Fed rate cut next month. The swaps market is currently fully pricing in one 25 basis-point reduction in September and 100 basis points of cuts through year-end, indicating a degree of confidence that the central bank will deliver one half-point cut in the remaining three meetings of 2024.

Treasuries edged lower in Asia after a flat day on Wednesday and an index of the dollar treaded water. The yen was little changed near 147 per dollar after weakening Wednesday, and was largely flat following the gross domestic product data that exceeded forecasts.

Evercore’s Krishna Guha said the US CPI wasn’t perfect but was good enough as it was consistent with a tame read on the Fed’s preferred inflation measure. In addition, the central bank has disavowed data-point dependence, and is looking at the wider outlook and balance of risks.

“This is now a labor data-first Fed, not an inflation data-first Fed, and the incoming labor data will determine how aggressively the Fed pulls forward rate cuts,” Guha said.

Asian Data

In Asia, data set for release Thursday includes July trade for Indonesia, while markets in South Korea and India will be closed. The People’s Bank of China will announce its medium-term lending facility rate, while home prices, retail sales and industrial production figures are also expected.

Article content

Article content

Tencent Holdings Ltd. will be in focus after posting an 82% increase in net income, helped along by demand for its mobile games. Despite the results, the company’s US-listed shares fell Wednesday, weighed down by concerns about the Chinese economy.

Hedge fund manager Michael Burry, who bet against the US housing market in 2008, further increased his stake in Alibaba Group Holding Ltd. despite cutting his equity portfolio in half in the second quarter.

Investors will also be focused on further reaction to the decision by Japanese Prime Minister Fumio Kishida to bow out of the ruling Liberal Democratic Party’s leadership election next month. The move will trigger “a period of modest political uncertainty,” according to Taro Kimura, Senior Japan Economist for Bloomberg Economics. “That’s hardly a welcome prospect for markets in light of the recent turmoil in stocks and the yen and the political spotlight on the Bank of Japan’s rate hike last month.”

US Stocks

The S&P 500 extended its advance into a fifth straight day on Wednesday, the longest winning streak in more than a month. Most of its major groups gained, with financial, energy and tech shares leading the charge. In late trading, Cisco Systems Inc. climbed on a solid revenue forecast. 

Article content

Megacaps were mixed, with Nvidia Corp. up and Alphabet Inc. down. Wall Street’s “fear gauge” – the VIX – continued to subside, dropping to around 16. That’s after an unprecedented spike that took the gauge above 65 last week. 

Fed Bank of Chicago President Austan Goolsbee said he is growing more concerned about the labor market than inflation, in an interview with Bloomberg News Wednesday.

At Nationwide, Mark Hackett says “calming macro fears” are among the factors providing an improved backdrop for equities. The stress of the market decline is a “fading memory,” he noted.

In commodities, oil clawed back gains in early trading after falling for a second session on Wednesday. Gold was steady early Thursday after two daily declines to trade around $2,447 per ounce.

Key events this week:

• China home prices, retail sales, industrial production, Thursday
• US initial jobless claims, retail sales, industrial production, Thursday
• Fed’s Alberto Musalem and Patrick Harker speak, Thursday
• US housing starts, University of Michigan consumer sentiment, Friday
• Fed’s Austan Goolsbee speaks, Friday

Article content

Some of the main moves in markets:

Stocks

• S&P 500 futures were little changed as of 8:17 a.m. Tokyo time
• Nikkei 225 futures fell 0.2%
• Hang Seng futures fell 0.7%
• S&P/ASX 200 futures rose 0.4%

Currencies

• The Bloomberg Dollar Spot Index was little changed
• The euro was little changed at $1.1013
• The Japanese yen was little changed at 147.35 per dollar
• The offshore yuan was little changed at 7.1476 per dollar

Cryptocurrencies

• Bitcoin fell 0.3% to $58,983.76
• Ether fell 0.2% to $2,671.12

Bonds

• Australia’s 10-year yield declined two basis points to 3.91%

Commodities

• West Texas Intermediate crude rose 0.5% to $77.33 a barrel
• Spot gold was little changed

This story was produced with the assistance of Bloomberg Automation.

Article content