Asian Shares Gain With Tech, Inflation Top Themes: Markets Wrap

(Bloomberg) — Asian equities advanced after a rally in the world’s largest tech stocks lifted global shares to new highs ahead of US consumer prices data due later Thursday.

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Equities in Japan, Australia and China rose, following a bullish session on Wall Street Wednesday. The dollar fell against most major currencies before key US inflation data that may signal easing price pressures and raise the chance of Federal Reserve interest-rate cuts.

Taiwan Semiconductor Manufacturing Co. traded at record levels after the sole supplier of Nvidia Corp. and Apple Inc.’s most advanced chips said second-quarter sales grew the fastest since 2022. Sony Group Corp., Tencent Holdings Ltd. and Korean chipmaker SK Hynix Inc., which traded at its highest levels since 2000, were among top contributors to the climb in the regional stock index.

The S&P 500 and Nasdaq 100 each gained more than 1%, and a gauge of global equities also rose, all to records, spurred by the likes of Nvidia and Apple. The iPhone maker said it aims to ship 10% more new devices after a bumpy 2023. The S&P 500 has advanced in each of the past seven sessions, its longest winning streak since November.

“Markets remain remarkably calm despite the flood of data this week, including Fed Chair Powell’s testimony, CPI/PPI reports, and the beginning of earnings season,” said Mark Hackett at Nationwide.

The so-called core CPI, which excludes food and energy costs and is seen as a better measure of underlying inflation, is expected to rise 0.2% in June for a second month. That would mark the smallest back-to-back gains since August — a pace seen as palatable for Fed officials.

“June’s CPI report looks to be another ‘very good’ report that should boost the FOMC’s confidence about the inflation trajectory,” said Anna Wong at Bloomberg Economics. “That should set the stage for the Fed to start cutting rates in September.”

Swaps are pricing in two Fed cuts in 2024, with a strong chance of the first coming in September.

In Asia, investors will be looking at any impacts of the China Securities Regulatory Commission’s decision to tighten rules on short selling and high-frequency trades in a bid to crack down on improper arbitrage and maintain market stability. Sentiment toward Chinese stocks has deteriorated ahead of the country’s Third Plenum, which convenes next week.

Meanwhile, Jerome Powell told Congress that the Fed doesn’t need inflation below 2% before cutting rates and that officials still have more work to do. He noted the labor market has cooled “pretty significantly.” Powell cited a “good ways to go” on the balance-sheet runoff, and said commercial real estate doesn’t threaten financial stability.

“The key takeaway from his testimony is the Fed’s assessment of the balance of risks is shifting in ways that – if supported and sustained by incoming data – will deliver a rate cut in September,” said Krishna Guha at Evercore ISI.

Bank of England Chief Economist Huw Pill said on Wednesday that the timing of a rate cut is still an “open question,” prompting traders to pare bets on an August reduction.

Elsewhere, the Bank of Korea left its benchmark interest rate unchanged Thursday as it seeks more evidence that inflation will continue to cool. Economic reports in Asia Thursday include consumer confidence in Thailand and a monetary policy decision in Malaysia. Money supply and new lending figures for China may also be released as soon as Thursday.

Oil climbed for a second day as signs of growing demand and a risk-on tone across broader markets combined to aid sentiment. Gold advanced for a third day.

Key events this week: