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Asian stocks mostly reflected positive developments on Wall Street in early trading Thursday as easing U.S. consumer inflation boosted hopes of an imminent big rate cut and Japan’s economic growth beat expectations.
The much-anticipated U.S. Consumer Price Index (CPI) data showed that the U.S. Consumer Price Index rose 2.9% last month from a year earlier – the smallest 12-month increase since March 2021 – laying the groundwork for the Federal Reserve to begin cutting interest rates.
Traders are optimistic that the September meeting could see a bigger rate cut than the expected 25 basis points, with some observers expecting a 50 basis point cut.
“The focus now is not whether the Fed will cut rates at its much-anticipated Sept. 17-18 meeting, but how aggressively they will cut,” Stephen Innes of SPI Asset Management said in a note.
Positive growth data from Japan meant the Nikkei 225 led Asian stocks higher as the world’s fourth-largest economy reported better-than-expected GDP growth of 0.8% in the second quarter.
The comments came a day after Prime Minister Fumio Kishida announced he would resign next month as his approval ratings plummeted in opinion polls ahead of next year’s general election due to rising prices that have eroded incomes and a series of scandals.
“Consumer sentiment should improve as promised pay rises start to trickle down to workers and real wages have turned positive,” Hiroyuki Ueno, chief strategist at SuMi Trust, said before the data was released.
“In addition, the resumption of shipments by some automakers, some of which had suspended production in May, will also provide a positive boost to consumer spending.”
But the news from China is not so optimistic.
Industrial production slowed in July, consumer spending rose slightly – slightly more than analysts expected – while the unemployment rate rose.
The dismal data dampened slim hopes for an economic recovery in Asia’s largest market.
“This once-booming economic picture highlights the continued drag on domestic demand, which has not been significantly alleviated by government measures to stimulate consumption and address imbalances in the recovery,” Ines said.
“No amount of rate cuts seems likely to spur consumer spending if there is a lack of confidence in the economy or personal financial security.”
Despite the less-than-optimistic news, Shanghai stocks were higher in early trade, while Hong Kong stocks also edged higher after a slow start.
Seoul, Sydney and Singapore also moved up the rankings, while Taipei and Jakarta dropped.
– Key data around 03:10 GMT –
Tokyo – Nikkei 225: Up 1.0% to 36,808.75 (breakout)
Hong Kong – Hang Seng Index: Up 1.0% to 17,281.35
Shanghai Composite Index: Up 1.2% to 2,884.92
EUR/USD: Down to $1.1008 from $1.1012 on Tuesday
GBP/USD: Up to $1.2830 from $1.2829
USD/JPY: Up to 147.46 yen from 147.43 yen
EUR/GBP: Down to 85.80 pence from 85.83 pence
West Texas Intermediate crude: Up 0.39% to $77.28 a barrel
Brent North Sea crude: Up 0.36% to $80.01 a barrel
New York – Dow Jones: Up 0.6% to 40,008.39 (close)
London – FTSE 100: Up 0.6% to 8,281.05 (close)
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