Hong Kong was among the best performing markets in Asia after the below-forecast US inflation data.
Photo: Bertha WANG / AFP
Source: AFP
Asian markets extended a global rally Thursday after below-forecast US inflation provided a much-needed shot of relief to investors and revived hopes for interest rate cuts this year.
Strong earnings from Wall Street banking titans and a ceasefire deal between Israel and Hamas added to the optimistic mood on trading floors.
Still, there remains a certain amount of caution ahead of Donald Trump returning to the White House next week, having promised to ramp up tariffs on imports, and slash taxes and regulations that many fear could reignite inflation.
Data on Wednesday showing core consumer prices rose less than expected in December helped spur a surge in New York-listed stocks led by tech giants including Nvidia, Amazon and Google-parent Alphabet.
The S&P 500 and the Dow piled on more than one percent and the Nasdaq more than two percent, putting them back in the green for 2025, with healthy earnings reports from Goldman Sachs, JPMorgan Chase, BlackRock and Bank of New York Mellon also lifting sentiment.
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The inflation figures tempered worries that the Federal Reserve might not cut rates this year — or possibly even hike them — following a blockbuster jobs report on Friday.
Swap traders are now eyeing a reduction in July, having been looking at September or October at best.
New York president John Williams also provided some soothing comments, saying “the process of disinflation remains in train”.
Preston Caldwell, chief US economist at Morningstar, said: “Data on economic growth has continued to roll in stronger than expected, contributing to the upward revision in our 2024 expectation.
“However, strong growth has helped generate a large rise in bond yields. If it persists, higher borrowing costs will seriously degrade (gross domestic product) growth in 2025 and 2026.
“Still, we expect the Fed to respond adroitly to decelerating growth in 2025 and 2026 with hefty rate cuts, ultimately triggering a growth rebound in 2027 and 2028.”
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Asian markets rose across the board.
Hong Kong, Sydney, Seoul, Taipei, Manila and Jakarta all piled on more than one percent, while there were also gains in Shanghai, Singapore and Wellington.
Tokyo also edged up but was limited by a pick-up in the yen against the dollar after the inflation data and as investors assess the chances of a rate hike by the Bank of Japan at its meeting next week.
Oil prices also extended a surge this week fuelled by fresh US-UK sanctions on Russia’s energy sector and amid fears Trump will ramp up measures against key producer Iran when he takes the Oval Office.
Meanwhile, data Wednesday showed US inventories fell for an eighth week to their lowest since April 2022, with the International Energy Agency saying a colder winter has pushed global demand higher.
Key figures around 0230 GMT
Tokyo – Nikkei 225: UP 0.3 percent at 38,551.96 (break)
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Hong Kong – Hang Seng Index: UP 1.5 percent at 19,577.59
Shanghai – Composite: UP 0.7 percent at 3,249.96
Euro/dollar: UP at $1.0297 from $1.0293 on Wednesday
Pound/dollar: DOWN at $1.2236 from $1.2239
Dollar/yen: DOWN at 155.65 yen from 156.52 yen
Euro/pound: UP at 84.15 pence from 84.08 pence
West Texas Intermediate: UP 0.3 percent at $80.27 per barrel
Brent North Sea Crude: UP 0.2 at $82.22 per barrel
New York – Dow: UP 1.7 percent at 43,221.55 points (close)
London – FTSE 100: UP 1.2 percent at 8,301.13 (close)
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Source: AFP