Japan stocks pared their early gains, while Australian and South Korean markets edged lower and China benchmarks fluctuated at the open. US equity futures slipped in Asia trading after Wall Street benchmarks ended Thursday little changed. 

US consumer price index data showed headline prices increased more than expected in December, while core inflation fell — although less than consensus estimates. The data failed to dent the outlook for Federal Reserve rate reductions. Swaps pricing for a cut by March increased slightly on the day, back toward levels seen at the end of 2023.

China’s consumer prices fell for a third straight month in December, a sign of weak domestic demand. That may justify the need for China’s central bank to cut a key policy rate and pump more cash into the financial system on Monday. 

West Texas Intermediate rose more than 2% to above $73 after UK Prime Minister Rishi Sunak approved joint military strikes with the US against Houthi rebels in Yemen following their attacks on ships in the Red Sea. 

“If oil were to substantially increase and that would jeopardise this soft landing scenario that is quite likely for the year,” Andrew Slimmon, head of applied equity advisors at Morgan Stanley Investment Management, said on Bloomberg Television.

Federal Reserve Bank of Cleveland president Loretta Mester pushed back against the prospect of a March cut and said the inflation figures showed policymakers had further work to do. 

“What should be most important for investors is that the Fed is done raising rates,” said Chris Zaccarelli at Independent Advisor Alliance. “Whether they cut in March or cut in June and whether they cut four times, three times, or only two times, shouldn’t matter too much.”

Treasuries were slightly lower early on Friday after a rally on Thursday pushed the 10-year yield down six basis points and the policy-sensitive two-year yield down by around 11 basis points. 

Falling yields weakened the dollar against major currencies with the Norwegian Krone and New Zealand dollar the leading beneficiaries among G-10 currencies early Friday. Australia and New Zealand yields fell, mirroring Thursday declines for Treasury yields.

Bitcoin, China

Elsewhere, more than $4-billion worth of shares traded between the 11 US spot Bitcoin exchange-traded funds on Thursday following Securities and Exchange Commission approval for the funds. Bitcoin rose slightly to trade above $46,000.

In Asia, Japan’s November current account balance came in below forecasts. CPI figures for India are also due.