Finance
Stocks soar to record highs ahead of US inflation test
By Tom Westbrook
SINGAPORE (Reuters) – Stocks rose on Thursday, with markets from Tokyo to New York hitting record highs, as traders counted down U.S. data expected to show an easing in inflation and pave the way for interest rate cuts in September.
Bonds and the dollar were steady, leaving the yen on the weak side of 161 per dollar and near its lowest level in decades.
Gains in heavyweight technology stocks sent the S&P 500 up 1% overnight to a sixth straight record high, and in Asia, Japan’s Nikkei rose 1% to a record high of 42,426. [.T]
MSCI’s broadest index of Asia-Pacific shares outside Japan also rose 1% to a two-year high. Taiwanese shares hit a record peak and Australia’s ASX 200 was within striking distance of its all-time high.
“The main driver is really the prospect of rate cuts,” said Shane Oliver, chief economist and head of investment strategy at AMP in Sydney. “If we get good inflation numbers, this will be one of Powell’s boxes.”
US Federal Reserve Chairman Jerome Powell told lawmakers on Capitol Hill overnight that “more good data” would strengthen the case for the US central bank to cut rates. Futures prices imply about a 75% chance of a cut in September.
Economists predict that the annual US CPI will slow to 3.1% in June from 3.3% in May.
The Bank of Korea kept a close eye on interest rates and Governor Rhee Chang-yong told reporters it was time to prepare for rate cuts.
A change in tone at the Reserve Bank of New Zealand led to a sharp revaluation of interest rate cut expectations on Wednesday, with the two-year swap rate falling 18 basis points and the currency falling.
Malaysia is expected to keep rates steady later in the day, and the US earnings season will also start with results from Delta Air Lines and consumer market PepsiCo, followed by banking results on Friday.
CHINA BACKLAY
Chinese stock prices followed market momentum on Thursday, but a drumbeat of disappointing data and talk of tariffs in key export markets have made the rally difficult to sustain. China’s GDP print is expected on Monday.
Hong Kong’s Hang Seng rose 1%, and on the mainland the blue-chip CSI300 climbed 0.4%, although it remains quite close to Tuesday’s four-and-a-half-month low. [.HK][.SS]
The Chinese yuan was steady at 7.2738 per dollar, barely stronger than a nearly eight-month low hit on Wednesday. [CNY/]
Elsewhere, moves were modest ahead of the US CPI release.
The euro traded higher at $1.0835. Sterling hit a one-month high of $1.2854 as the Bank of England’s chief economist overnight sounded more vague about the timing of the rate cuts than many traders had expected. [FRX/]
The yen hovered at 161.58 per dollar. Data showed nuclear machinery orders in Japan unexpectedly fell for the second month in a row, casting doubt on expectations for a rate hike.
The New Zealand dollar found support at the 200-day moving average and traded at $0.6095. The Australian dollar rose 0.2% to a six-month high of $0.6763. [AUD/]
U.S. Treasury yields were steady overnight in Asia, with the U.S. two-year yield holding at 4.62% and the benchmark 10-year yield at 4.29%. [US/]
In commodities trading, oil prices rose on signals of strong gasoline demand in the US. Brent futures rose 35 cents, or 0.4%, to $85.43 a barrel. U.S. crude rose 36 cents, or 0.5%, to $82.47 a barrel. [O/R]
Favorable weather in the US has left wheat futures under pressure near two-and-a-half month lows. [GRA/]
Gold rose 0.2% to $2,373 an ounce. After a sell-off last week, Bitcoin has remained around $58,900.
(Reporting by Tom Westbrook; Editing by Sherry Jacob-Phillips)
