SINGAPORE- Asian stocks rose on Wednesday while the dollar drifted lower as traders weighed mixed US producer price data and braced for the crucial consumer price report later in the day that is likely to influence the Federal Reserve’s near-term policy path.
MSCI’s broadest index of Asia-Pacific shares outside Japan rose 0.38 percent , scaling a fresh 15-month high earlier in the session. Japan’s Nikkei gained 0.58 percent .
Data overnight showed US producer prices increased more than expected in April, indicating that inflation remained stubbornly high early in the second quarter.
Fed Chair Jerome Powell, speaking at a banking event in Amsterdam, called the PPI data “mixed” rather than “hot” because prior data was revised lower.
Investors have had to dial back their expectations of US rate cuts this year due to sticky inflation and are now pricing in 43 basis points of easing this year, compared with 150 bps of easing anticipated at the start of 2024.
“Market anticipation of rate cuts has been building recently based on weaker-than-expected US labor market data, but if prices don’t follow suit, then rate-cut hopes will be dashed,” said Ryan Brandham, head of global capital markets, North America at Validus Risk Management.
All eyes are now on Wednesday’s US consumer prices report, which is expected to show CPI rose 0.3 percent month-on-month in April, down from a 0.4 percent growth the previous month, according to a Reuters poll.
Powell reiterated his message of caution over rate cut expectations although the Fed chief, along with Federal Reserve Bank of Cleveland President Loretta Mester, poured cold water over any rate hike thoughts, ING economists said.
“That doesn’t necessarily sound like someone who is expecting a great CPI number today.”
The Nasdaq scored a record closing-high on Tuesday and the S&P 500 and the Dow also rose, boosted by Powell’s comments that reassured investors that the central bank’s next interest rate move was unlikely to be a hike.
Retail investor darlings GameStop and AMC soared overnight, as posts from “Roaring Kitty” Keith Gill raised chatter about the return of the central figure behind the 2021 meme stock frenzy.
