SINGAPORE – Asian stocks rose on Thursday ahead of US inflation data that could influence the Federal Reserve’s thinking on rate cuts, while the crypto world got a boost after exchange-traded funds (ETFs) to track bitcoin were approved in the United States.
MSCI’s broadest index of Asia-Pacific shares outside Japan was 0.67 percent higher, on course to snap its seven-day losing streak.
Japan’s Nikkei breached 35,000 for the first time since February 1990 in a blistering start to the year, after rising 28 percent in 2023, its strongest yearly performance in a decade. The Nikkei was last up 1.9 percent at 35,085 on Thursday.
On the other hand, China stocks loitered near 5-year lows as investor sentiment remained subdued. The blue-chip CSI 300 Index edged higher in early trading, while Hong Kong’s Hang Seng Index rose 1.5 percent.
On Wednesday, US stocks closed higher as mega caps rallied, but gains were limited ahead of inflation reports and major bank earnings later in the week. E-mini futures for the S&P 500 rose 0.14 percent.
Market attention has zeroed in on the US consumer price index report (CPI) due later on Thursday. Core CPI is forecast to remain unchanged at 0.3 percent from the month before, while year-on-year inflation is expected to slow to 3.8 percent from November’s 4 percent, a Reuters poll showed.
“The risk is that markets sell off on a strong print,” said Ben Bennett, APAC investment strategist for Legal and General Investment Management (LGIM). “The reaction could be more muted if we get a soft number.”
Investors have been rethinking just how steep and early the Fed will cut rates since the start of the year. Fed futures prices indicate traders anticipate 140 basis points of easing this year, compared with 160 bps of cuts expected at the end of 2023.
Markets are pricing in a 67 percent chance of a rate cut in March, the CME FedWatch tool showed.
Federal Reserve Bank of New York President John Williams said on Wednesday it is still too soon to call for rate cuts as the central bank still has some distance to go on getting inflation back to its 2 percent target.
LGIM’s Bennett said that investors are underestimating the risk of a US recession. “Soft CPI prints could eventually become a sign of disappointing demand. But that’s probably still a while away.”
