Asian Stocks Echo US Rally Ahead of Inflation Data: Markets Wrap

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

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Equities in Japan and Australia and futures for Hong Kong stocks all rose, echoing the bullish pulse on Wall Street on Wednesday that led the S&P 500 and Nasdaq 100 each more than 1% higher to records. The S&P 500 has advanced in each of the past seven sessions, its longest winning streak since November, helping propel a gauge of global equities to a record.

The US stock gains reflected a rally in the final minutes of trade that centered upon the likes of Nvidia Corp. and Apple Inc. The iPhone maker said it aims to ship 10% more new devices after a bumpy 2023. Taiwan Semiconductor Manufacturing Co., the sole supplier of Nvidia and Apple’s most advanced chips, said second-quarter sales grew at their fastest pace since 2022.

Treasuries ended Wednesday steady after a strong $39 billion sale of 10-year bonds. Swaps are pricing in two Fed cuts in 2024 — and higher chances of the first coming in September. Australian and New Zealand bonds were little changed in early trading.

An index of dollar strength was little changed after a Wednesday decline. The yen was steady after weakening further against the greenback in the previous session.

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.

Meanwhile, as Wall Street gears up for the consumer-price index, 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.

US Inflation

“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 more 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.”

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.

A busy day of economic reports in Asia includes consumer confidence in Thailand, machine orders in Japan and monetary policy decisions in Malaysia and South Korea. Money supply and new lending figures for China could also be released as soon as today.

Oil edged higher in early Thursday trading, while gold was little changed after climbing for a second session on Wednesday.

Key events this week: