Source: AFP
Asian markets were mostly lower on Friday as traders struggled to build on Wall Street’s positive lead, with hopes of a June rate cut fading, while earnings season kicks off in the United States amid optimism about the outlook company profits.
Tech titans helped lift gains on the Nasdaq and the S&P 500 after producer price index data broadly met expectations, easing inflation concerns after Wednesday’s data showed a third consecutive upward loss in consumer prices.
The CPI data followed a string of indicators suggesting the world’s No. 1 economy remained resilient and the labor market strong despite interest rates remaining at two-decade highs and inflation still well above the Federal Reserve’s target.
That has led investors to cut their bets on a rate cut from six at the start of the year to two now, with former Treasury Secretary Lawrence Summers even warning that a hike could not be ruled out.
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Central bank officials have been reluctant to give full support to any reductions anytime soon.
New York Fed chief John Williams said there had been “enormous progress” in the fight against inflation, but there was no need to go “very near-term”, while Richmond boss Thomas Barkin added that policymakers they could spend time.
Their Boston counterpart, Susan Collins, said the latest data “suggests that less policy easing may be warranted this year than previously thought.”
While US traders pounced on the producer price numbers, Michael Shaoul at Marketfield Asset Management said: “While we understand the relief with which this report will be received, there is nothing very encouraging about it — and the best that can to be told is that there was no new bad news either.’
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The ECB was seen holding interest rates for the last time
Asian traders were also less impressed.
Hong Kong, Shanghai, Sydney, Seoul, Singapore and Wellington were all in the red, while Tokyo, Taipei and Manila rose.
Diminished hopes of interest rate cuts continued to support the dollar, which surged to another 34-year high above 153 yen, putting Japanese officials in the spotlight after they said they were ready to intervene in markets to support their currency.
However, gold rose on the back of the PPI reading, pushing it to a new record high of 2,395.48 with traders also looking to it as a safe haven amid ongoing concerns about the Middle East conflict.
Attention now turns to the corporate reporting season, which begins in earnest later in the day with banking giants JPMorgan and Citibank among those to open their books.
Analysts said that while a rate cut would be a major boost for stocks, investor optimism about the company’s earnings was crucial.
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“The recent string of strong US economic data releases has helped build expectations for companies to report encouraging earnings figures and guidance,” National Australia Bank’s Rodrigo Catril said.
Keys around 03:00 GMT
Tokyo – Nikkei 225: UP 0.5 percent at 39,642.66 (break)
Hong Kong – Hang Seng Index: DOWN 1.5 percent to 16,843.24
Shanghai Composite: DOWN 0.1 percent at 3,032.26
Dollar/yen: DOWN at 153.13 yen from 153.25 yen on Thursday
EUR/USD: DOWN to $1.0726 from $1.0730
GBP/USD: DOWN to $1.2554 from $1.2556
Euro/pound: DOWN to 85.41 pence from 85.43 pence
West Texas Intermediate: UP 1.0 percent to $85.86 a barrel
North Sea Brent crude: UP 0.8 percent at $90.48 a barrel
New York – Dow: FLAT at 38,459.08 (close)
London – FTSE 100: Down 0.5% to 7,923.80 (close)
Source: AFP