Asian Stocks Gain After US Core Inflation Cools: Markets Wrap

This content was published on January 16, 2025 - 03:27

5 minutes

(Bloomberg) — Shares in Asia followed Wall Street higher Thursday as easing US core inflation kept alive the prospect of Federal Reserve rate cuts this year. The yen jumped on Bank of Japan rate-hike expectations.

Gauges in Australia, Hong Kong and China all notched gains, sending an index of Asian equities higher for a third day. The S&P 500 closed Wednesday 1.8% higher, the benchmark’s best day since the November election, which erased its 2025 decline.

The yen rose on a report that BOJ officials see a good chance of a rate increase next week as long as Donald Trump’s arrival at the White House doesn’t trigger too many negative surprises. The South Korean won strengthened as the central bank unexpectedly left interest rates unchanged. Treasuries and an index of the dollar steadied.

Swap traders are back to fully pricing in a rate cut by July following the US inflation report, reinstating bets that were dashed when December jobs data came in stronger than expected. But the renewed appetite for risk will be tested in the coming days as the Fed and the Bank of Japan hand down policy decisions and US President-elect Donald Trump takes office.

“We’re in a goldilocks scenarios where growth is holding up,” Suresh Tantia, a strategist for UBS Wealth Management, said on Bloomberg Television. “We do expect the earnings of tech companies in Asia to rise substantially this year, especially in the AI space.”

Japan’s currency rallied as much as 0.8% as BOJ officials were said to acknowledge there’s a likelihood the rate will be raised from 0.25% at the end of its two-day meeting on Jan. 24. That’s so unless Trump ruffles markets or changes expectations about the global economy at the start of his presidency.

“The yen’s on a roll today, thanks to the BOJ hinting at a possible rate hike in January,” said Charu Chanana, chief investment strategist at Saxo Markets. “But, the BOJ loves to surprise with dovish commentary, so if the hike comes with dovish remarks, the yen’s gains might be short-lived.”

In commodities, oil extended a powerful early-year advance on mounting risks to global supplies, and as commercial crude inventories in the US posted their longest run of declines since 2021. Gold was little changed.

The Canadian dollar was little changed after a report stated the country has drawn up a list of US goods it would hit with tariffs if President-elect Donald Trump decides to levy tariffs on Canadian goods.

Later Thursday, the European Central Bank will release its meeting minutes while US data to be released includes initial jobless claims and retail sales, providing investors with a broader picture of the health of the world’s largest economy.

Cooling Inflation

The so-called US core consumer price index — which excludes food and energy costs — increased 0.2% in December. That marked the first stepdown in the rate in six months. From a year ago, it rose 3.2%. That’s still above the Fed’s 2% target.

A handful of Federal Reserve officials said the data offered confidence that inflation would continue to ebb. “The process of disinflation remains in train. But we are still not at our 2% goal, and it will take more time until we can achieve that on a sustained basis,” New York Fed President John Williams said Wednesday.

Maintaining the dollar as the world’s reserve asset is critical to US economic health and the nation’s future, Scott Bessent, Donald Trump’s nominee for Treasury secretary, will tell a Senate committee, according to prepared remarks.

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