Asian markets were mostly strong on Friday, with the yen hovering around nine-month highs after another healthy day on Wall Street, as investors braced for an expected U.S. interest rate cut next week.
More evidence suggesting the U.S. Federal Reserve was winning the battle against inflation provided an extra kick for stocks after another roller-coaster week that started with big losses fueled by concerns that the world’s top economy could be headed for recession .
While concern after last Friday’s big miss on US jobs – which followed another much lower forecast read a month ago – continues to linger, traders are now turning their attention to the central bank’s decision on September 18.
Having cut rates in the early months of the pandemic, the Fed began hiking in 2022 as inflation took hold, and they continued to raise rates for a year until they hit a two-decade high.
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Now, with deflation seemingly kicking in and the labor market softening, policymakers are expected to start cutting again, but the debate revolves around whether to move 25 or 50 basis points.
Thursday’s data showed wholesale prices rose 0.2 percent in August, putting the benchmark year-on-year at 1.7 percent, from a revised 2.1 percent the previous month.
However, when volatile food and energy components were removed, it rose 0.3%, beating forecasts.
The readings came a day after news that the consumer price index had hit its lowest level since February 2021, but the key gauge had risen more than expected from the previous month.
Observers said the data did not change the view that borrowing costs would fall, but made the case for a bigger move harder.
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Confidence that the Fed will cut gave support to Wall Street, particularly in the key technology sector, with the Nasdaq up one percent.
And Asia mostly followed suit.
Hong Kong gained more than one percent. E-commerce titan and market heavyweight Alibaba was the main driver of gains, underpinning this week’s rally as mainland Chinese investors snapped it up after it was included on Tuesday in a program that allows them to buy shares in Hong Kong-listed companies .
Shanghai, Sydney, Seoul, Singapore, Taipei, Manila and Jakarta were also well in the green.
Tokyo was weighed down by a stronger yen, which hovered just above the 141 mark per dollar last touched in late December on bets the Fed will ease monetary policy.
The Japanese unit has risen sharply from levels near 162 reached in July, prompting authorities to step in and spend billions to prop it up.
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Expectations that the Bank of Japan will raise interest rates for a third time this year also gave the currency a big boost, while policymakers suggested they would continue to rise if the economy and inflation perform as forecast.
Daiwa Securities said “intense speculation about additional Bank of Japan rate hikes sent (the dollar) lower.”
The BoJ looks set to address interest rates at its meeting next week, but investors are closely watching the talks after it announced a surprise hike at its latest meeting, sending markets into a tailspin.
Keys around 02:30 GMT
Tokyo – Nikkei 225: Down 0.9% at 36,507.10 (break)
Hong Kong – Hang Seng Index: UP 1.7 percent at 17,540.81
Shanghai – Composite: UP 0.4 percent to 2,726.70
Dollar/yen: DOWN at 141.02 yen from 141.78 yen on Thursday
EUR/USD: UP at $1.1088 from $1.1078
GBP/USD: UP at $1.3147 from $1.3126
US consumer inflation eased more than expected in August
Euro/pound: DOWN to 84.33 pence from 84.36 pence
West Texas Intermediate: UP 0.5% to $69.33 a barrel
North Sea Brent crude: UP 0.5 percent at $72.31 a barrel
New York – Dow: UP 0.6 percent at 41,096.77 (close)
London – FTSE 100: UP 0.6 per cent at 8,240.97 (close)
Source: AFP