Asian Stocks Rebound, Dollar Weakens After US CPI

Stocks in Australia, Japan and South Korea rose. S&P 500 and Nasdaq 100 futures also rose early Thursday after both benchmarks gained more than 1% to new highs on Wednesday. Hong Kong stocks will resume trading on Thursday after a public holiday.

Australian and New Zealand government bonds rallied. Treasuries held steady after the previous session’s gains sent yields lower across the curve. The US 10-year yield fell 10 basis points, while the two-year yield, sensitive to monetary policy, fell nine basis points as investors brought forward expectations for rate cuts. ‘interest. Swap market prices had been forecast to fall this year, but that fell to double following Wednesday’s inflation.

The Bloomberg Dollar Index fell to its lowest level in a month as the currency weakened against all of its Group of 10 peers, tracking falling yields.

The yen pared some of Thursday’s gains after Japan’s economy contracted in the first quarter as private consumption and investment spending fell. The yen rose 1% against the greenback in its previous session to reach its highest level in almost a week.

The US core CPI – which excludes food and energy costs – rose 0.3% from March, in line with consensus expectations but ending a streak of three readings above forecasts , which raised concerns about a strengthening of inflation. The year-over-year measurement slowed to the slowest pace in three years.

“We consider that the April figures are consistent with a direction of shift in inflation dynamics which – in the context of moderation in the real economy – may give rise to a decline in September followed by a second in December,” Evercore’s Krishna Guha said.

The latest inflation report could give U.S. policymakers hope that inflation will resume its downward trend, paving the way for rate cuts. Separate retail sales data indicated some slowdown in resilient consumer demand that has supported the economy.

“The market likes it,” said Gary Pzegeo of CIBC Private Wealth US. “The news on core inflation was better than expected. Retail sales also showed some deceleration compared to the previously busy consumer sector. Taken together, these elements argue in favor of a Fed rate cut in the fall. »

The next CPI figures will be released on the exact same day the Fed meets to decide interest rates – June 12.

Minneapolis Fed President Neel Kashkari reiterated that the central bank was likely to keep rates at current levels for “some time to come” and questioned how much it was holding back the U.S. economy.

On the corporate side, Boeing faces possible criminal charges after the U.S. Department of Justice found the company violated a deferred prosecution agreement related to two fatal crashes five years ago. Walt Disney Co. CEO Bob Iger said marketing spending for Disney+’s flagship streaming service is too high and will be cut.

Data to be released in Asia include labor market figures in Australia, industrial production in Japan and a monetary policy decision in the Philippines.

Oil edged higher on a larger-than-expected decline in commercial crude inventories. Gold prices also climbed early Thursday, putting the precious metal on track for its third daily rise.

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