SINGAPORE/NEW YORK- Asian shares tracked Wall Street higher on Thursday and the dollar was soft as easing core US inflation kept potential rate cuts by the Federal Reserve on the table, while the yen rose to a one-month high on rate hike bets.
Oil prices rose after a larger-than-expected decline in US crude oil stockpiles added to concerns about possible supply disruptions from new US sanctions on Russian energy trade.
On Wall Street, all three major indexes registered their biggest daily percentage gains since Nov. 6, the day after the US presidential election buoyed by strong earnings from JPMorgan, BlackRock and Goldman Sachs
MSCI’s broadest index of Asia-Pacific shares outside Japan rose 1.4 percent. China’s blue chip stocks rose 0.67 percent while Hong Kong’s Hang Seng index surged 1.5 percent.
Tech-heavy Taiwan stocks rose 2 percent as investors await earnings from AI chipmaker Taiwan Semiconductor Manufacturing Co2330., Asia’s most valuable company.
Overnight, data showed the consumer price index (CPI) rose in line with expectations at an annual rate of 2.9 percent in December, from November’s 2.7 percent. But core inflation, which excludes food and energy prices, rose by 3.2 percent, below forecasts for 3.3 percent.
Investors were particularly encouraged by the latest inflation reading since data released on Tuesday showed that US producer prices increased moderately in December.
“This report supports the view that the pricing out of rate cuts this year has gone a bit too far, and when the data turns lower again … some extra easing will be put back on the table,” said Kyle Chapman, FX markets analyst at Ballinger Group.
The inflation report led traders to price close-to-even odds the Fed would cut interest rates twice by the end of this year.
That took some steam out of the dollar against most currencies, with the dollar index which measures the greenback against a six other units, at 109.03.
“We anticipate a shallow FOMC easing cycle, although we think short-term hawkishness is overdone,” said Eric Robertsen, Standard Chartered’s global head of research and chief strategist at a media roundtable in Singapore.