Asian shares reached seven-month highs, buoyed by Wall Street‘s record-breaking performance. Despite slightly higher-than-expected U.S. inflation figures, investors remained optimistic, confident that it wouldn’t derail anticipated interest rate cuts later in the year.
China’s call for increased financial support for developer China Vanke provided further stability to Hong Kong stocks.
MSCI’s broadest index of Asia-Pacific shares outside Japan rose 0.2%, hitting its highest level since August. The Hang Seng index climbed 0.4%, reaching 3-1/2 month highs. In Japan, the Nikkei remained steady, with attention focused on ongoing springtime wage negotiations that could pave the way for an exit from negative interest rates.
U.S. consumer prices showed a solid 0.36% increase in February, slightly above expectations, driven by higher fuel and shelter costs. However, the annual core CPI slowed slightly to 3.8%, indicating manageable inflationary pressures.
Vishnu Varathan, chief economist for Asia excluding Japan at Mizuho Bank in Singapore, noted that while the inflation data was higher, it didn’t disrupt expectations for a mid-2024 rate cut.
U.S. Treasury yields rose following the inflation report, but interest rate futures only slightly declined, signaling a continued expectation of a rate cut. Despite initial hesitation, U.S. stock indexes surged to record highs, reflecting resilient market sentiment.
Tech stocks, in particular, performed well, with shares of Oracle jumping 12% after exceeding profit estimates. Analysts noted that calls for the tech sector were at a premium to puts, indicating optimism among traders for future gains.
In the currency markets, the dollar received some support from rising U.S. yields, while the yen strengthened slightly amid expectations of a rate rise in Japan. Meanwhile, gold retreated from near-record levels, and crude futures remained rangebound.
Bitcoin reached a new high of $72,989, underscoring the ongoing momentum in cryptocurrency markets.
