SINGAPORE- Asian stocks rose on Tuesday as traders in Korea returned from holidays in a mood to catch up on a global bounce, while other markets held steady ahead of US inflation data that will offer a crucial guide to the interest rate outlook.
Wall Street indexes posted a fourth straight session of gains overnight, while the US dollar retreated further from milestone highs – partly on hopes that the prices data might offer another signal that inflation has peaked.
MSCI’s broadest index of Asia-Pacific shares outside Japan rose 0.6 percent, led by a 2 percent jump for South Korea’s Kospi. Japan’s Nikkei tacked on 0.3 percent.
S&P 500 futures were flat, as were European futures. Easing oil prices have markets optimistic that headline inflation will steady or slow in the United States, and that this can reduce the need for future interest rate hikes.
Analysts warn that core inflation is likely to march on, however, and that the near-term rate implications are unclear.
“It’s too early to be celebrating the end of inflation, as some market participants seem already to be doing,” said ING economist Rob Carnell.
US crude is hovering below $90 a barrel, down nearly 30 percent since the middle of June and roughly where it traded before Russia’s invasion of Ukraine.
Interest rate futures imply a 90 percent chance that the Federal Reserve lifts its benchmark interest rate by 75 basis points at next week’s policy meeting – a position that is perhaps most vulnerable to a downside CPI surprise.
“The market-implied probability of a third 75 bp rate hike for September has increased noticeably in recent days,” said NatWest Markets’ US rates strategist Jan Nevruzi.
“Results close to expectations for the August CPI report may not change the outcome too much in terms of the market’s expectation,” he said.
