Asian equities climb as US record high lifts mood

Asian equities rose on Thursday as US stocks hit fresh highs ahead of inflation data that could define Federal Reserve policy easing in coming months.

Shares in Japan, South Korea and Australia rose while Hong Kong equity futures also advanced. An index of US-listed Chinese companies fell in New York trading on Wednesday, following the biggest drop in more than four years for the mainland China benchmark index.

Treasuries were flat in early Asian trading after yields edged higher in New York trading on Wednesday. The Bloomberg dollar spot index was flat on Thursday after rising 0.4% in the previous session – the eighth straight day. The yen was little changed against the greenback after falling to its lowest level since mid-August to around 149 per dollar on Wednesday.

Few signs of additional support appeared for China’s economy and financial markets, pointing to further intensity for the nation’s equities. A measure of volatility for Hong Kong stocks was a touch lower on Wednesday but remained above historical averages. A key issue for investors is whether there will be more fiscal stimulus. Authorities said on Wednesday that a press conference on the subject would be held over the weekend.

The Taiwanese semiconductor manufacturing company reported a better-than-expected 39% rise in quarterly revenue on Wednesday. Markets in Taiwan are closed on Thursday.

The S&P 500 rose 0.7% to hit a record high, its 44th of the year, as tech shares again led the gains. Apple Inc. climbed 1.7%. Nvidia Corp. That halted a five-day rally while Tesla Inc. A robotaxy was on the lower edge ahead of the launch. US in historic big-tech antitrust case Alphabet Inc. on news that Google is weighing a breakup decreased by 1.5%.

According to Solita Marcelli, chief investment officer of the Americas at UBS Global Wealth Management, the gains for tech reflect previous weakness that represents an attractive buying opportunity. “We remain positive on the outlook for the tech sector as well as artificial intelligence,” she said. “We believe volatility should be used to build long-term AI exposure.”

US consumer price data to be released later on Thursday is expected to show more modest inflation, supporting the Fed’s expected easing in the coming months. Despite this, market pricing suggests that another 50 basis point rate cut is all but likely following last week’s strong jobs report.

Markets barely rose on Wednesday after minutes of the latest Fed meeting, which showed that Jerome Powell had received some push-back on a half-point rate cut in September, as some officials opted for a smaller reduction.

“Policymakers agree that inflation is easing and they see potential weakness in job growth,” said David Russell at TradeStation. “He puts every cut on the table if necessary. The bottom line is that Powell may end up leading the market late in the year.

Inflation data

The Consumer Price Index rose 0.1% in September, its smallest gain in three months. Compared with a year earlier, CPI likely rose 2.3%, the sixth-straight contraction and the highest since early 2021. The gauge, which excludes the volatile food and energy categories, which gives a better look at underlying inflation, is projected to rise 0.2%. A month ago and 3.2% from September 2023.

“The Fed’s decision to shift its focus from inflation to the labor market means that inflation data, including tomorrow’s CPI, is likely to be less market-moving than it should have been,” said Matthew Weller at Forex.com and CityIndex.

“While that is a logical observation, this month’s CPI report on the back of Friday’s stellar jobs report could still drive market volatility, with the reading signaling the potential for new upside risks to inflation,” he added.

Meanwhile, Fed Bank of San Francisco President Mary Daley said she expects the US central bank to continue cutting interest rates this year in an effort to protect the labor market. “I think two more cuts this year, or one more cut this year, really expands the range of what’s possible,” Daley said Wednesday, referring to a quarter-point or two reduction.

Among commodities, oil held steady as US crude inventories rose and traders eyed China’s plans for fiscal policy. Gold was little changed on Thursday after falling in the previous six sessions.