Asian stocks followed Wall Street's lead higher on Thursday. Equities in Japan, Australia and China rose, echoing the bullish pulse on Wall Street on Wednesday. The S&P 500 and Nasdaq 100 each gained more than 1%, and a gauge of global equities also rose, all to records, spurred by the likes of Nvidia Corp. and Apple Inc. The S&P 500 has advanced in each of the past seven sessions, its longest winning streak since November.
Taiwan Semiconductor Manufacturing Co. traded at record levels after the sole supplier of Nvidia and Apple’s most advanced chips said second-quarter sales grew at their fastest pace since 2022. The iPhone maker said it aims to ship 10% more new devices after a bumpy 2023. In Asia, Sony Group Corp. and SK Hynix Inc. were among top contributors to gains in the regional stock index.
“Markets remain remarkably calm despite the flood of data this week, including Fed Chair Powell’s testimony, CPI/PPI reports, and the beginning of earnings season,” said Mark Hackett at Nationwide.
The so-called core CPI, which excludes food and energy costs and is seen as a better measure of underlying inflation, is expected to rise 0.2% in June for a second month. That would mark the smallest back-to-back gains since August — a pace more palatable for Fed officials.
“June’s CPI report looks to be another ‘very good’ report that should boost the FOMC’s confidence about the inflation trajectory,” said Anna Wong at Bloomberg Economics. “That should set the stage for the Fed to start cutting rates in September.”
Swaps are pricing in two Fed cuts in 2024 — and higher chances of the first coming in September.
A gauge of dollar strength was little changed on Thursday, though the yen, Australian dollar and New Zealand dollar all inched higher against the greenback.
In Asia, investors will be looking at any impacts of the China Securities Regulatory Commission’s decision to tighten rules on short selling and high-frequency trades in a bid to crack down on improper arbitrage and maintain market stability. Sentiment toward Chinese stocks has also deteriorated ahead of the country’s Third Plenum, which convenes next week.
Meanwhile, as Wall Street gears up for the consumer-price index, Jerome Powell told Congress that the Fed doesn’t need inflation below 2% before cutting rates and that officials still have more work to do. He noted the labor market has cooled “pretty significantly.” Powell cited a “good way to go” on the balance-sheet runoff, and said commercial real estate doesn’t threaten financial stability.
“The key takeaway from his testimony is the Fed’s assessment of the balance of risks is shifting in ways that – if supported and sustained by incoming data – will deliver a rate cut in September,” said Krishna Guha at Evercore ISI.
Bank of England Chief Economist Huw Pill said on Wednesday that the timing of a rate cut is still an “open question,” prompting traders to pare bets on an August reduction.
Elsewhere, the Bank of Korea left its benchmark interest rate unchanged Thursday as it seeks more evidence that inflation will continue to cool. Economic reports in Asia on Thursday include consumer confidence in Thailand and a monetary policy decision in Malaysia. Money supply and new lending figures for China could also be released as soon as today.
Australian and New Zealand bonds were little changed in early trading on Thursday. Oil edged higher, while gold was little changed after climbing for a second session on Wednesday.