BEIJING, Aug. 11 (BNA): Asian stocks extended their global rally Thursday after weaker-than-expected US inflation data encouraged bets to raise interest rates less sharply from the Federal Reserve, while the dollar struggled to stabilize after its biggest drop. in five. months.
US consumer prices remained unchanged in July compared to June, when they rose monthly by 1.3%. The July result was less than expected due to the sharp drop in the cost of gasoline, causing markets to shift in hopes that inflation was at its peak, Reuters reported.
MSCI’s broadest index of Asia-Pacific shares outside Japan rose 1.4% to a six-week high, supported by a 1.8% jump in Hong Kong, a 1.2% advance in South Korean stocks, and 1.5% gains in blue-chip stocks in China.
Risk sentiment in Europe is set to continue when markets open, with futures contracts across the region on the Euro Stoxx 50 rising 0.4%. S&P 500 futures rose 0.2% and Nasdaq futures added 0.3%.
“Rising real yields, due to the Fed’s commitment to fighting inflation, has been a huge problem for valuations in 2022, so any pessimism is seen as positive by the stock market, especially for higher value companies,” said multilateralist Oliver Blackburn. Asset Portfolio Manager at Janus Henderson Investors.
“However, the more pessimistic outlook has undermined a major support for the US dollar.”
Overnight on Wall Street, the S&P 500 rose more than 2% after the inflation report, while the Nasdaq Composite added 2.9%. The Nasdaq has now gained more than 20% from its June low.
Slowing inflation in the US may have opened the door for the Federal Reserve to moderate the size of upcoming interest rate hikes. Traders are now pricing in a 50 basis point rate hike next month, compared to the 75 basis point increase expected before the inflation report.
“For the FOMC, the July inflation report is a satisfying first step toward being able to claim a win over inflation. However, at least one or two comparable inflation readings are necessary if they have confidence that the inflation emergency has passed, said Elliott Clark, chief economist at Westpac.
Indeed, policy makers have left no doubt that they will continue to tighten monetary policy until price pressures are completely broken.
During Wednesday’s session, Chicago Fed President Charles Evans said inflation remains “unacceptably high,” and that the Fed will need to continue raising interest rates.
Minneapolis Fed President Neil Kashkari said that while the inflation reading was “welcome,” the Fed was “a long way from declaring victory” and needed to raise interest rates much higher.
San Francisco Fed President Mary Daly also warned in an interview with the Financial Times that it was too early for the US central bank to declare victory in its fight against inflation and that a half-percentage point rate hike in September was its baseline.
US Treasuries, which pulled back from a previous drop in yields as traders reassessed the course of the Federal Reserve, were not traded in Asia on Thursday due to a holiday in Japan.
In the currency markets, the dollar rose 0.2% against its major peers after falling 1% in the previous session, the most in five months. Commodity currencies rose on improved risk appetite from hopes of a weak bearish.
Oil prices fell in early Asian trading as traders turned their attention once again to more supply of crude oil entering the market along with weak demand. Brent crude futures fell 0.4 percent to $97.02 a barrel, while US West Texas Intermediate crude futures fell by a similar margin to $91.52.
Spot gold fell 0.4% to $1,784.74 an ounce, moving further away from a one-month high hit in the previous session.
MI