Asian Markets Follow US Stocks Rally, Treasuries Fall: Markets Wrap

Stocks climbed to a record after an in-line US inflation reading bolstered speculation the Federal Reserve will have room to cut rates in September.

The MSCI All Country World Index rose 0.1% to an all-time high, tracking Wall Street’s surge to fresh peaks. A gauge of Asian shares rose 0.4% at open, helped by a new record for the Nikkei-225 index in Japan. Treasuries dipped with the yield on the 10-year inching up to 4.30%. The dollar was steady after falling in the prior session.

US inflation data bolstered expectations that the Fed can move toward rate cuts without reigniting price pressures. While underlying inflation accelerated to the strongest since the start of the year, the modest gain in goods prices eased fears that trade-related costs may feed into broader price pressures.

“Inflation is on the rise, but it didn’t increase as much as some people feared,” said Ellen Zentner at Morgan Stanley Wealth Management. “In the short term, markets will likely embrace these numbers because they should allow the Fed to focus on labor-market weakness and keep a September rate cut on the table.”

Fed Bank of Richmond President Tom Barkin said uncertainty over the direction of the economy is decreasing, but it’s unclear whether the central bank should concentrate more on controlling inflation or bolstering the job market.

In a social media post, President Donald Trump resumed his criticism of Jerome Powell over the central bank’s decision to hold rates steady. Trump also said he is weighing a lawsuit against the Fed chief over the renovation of the central bank’s headquarters - a project whose cost overruns have drawn scrutiny. 

“The Fed’s policy stance is highly data-dependent, and with inflation contained and labor market softness increasingly evident in revised payroll data, the emphasis will now be skewed toward employment,” said Alexandra Wilson-Elizondo at Goldman Sachs Asset Management. “This inflation print supports the narrative of an insurance rate cut in September, which will be a key driving force for the markets.”

The Fed has kept rates unchanged this year in hopes of gaining clarity on whether tariffs will lead to sustained inflation. At the same time, the labor market — the other half of their dual policy mandate — is showing signs of losing momentum.

With risks to the labor market rising, the Fed would likely tolerate temporarily higher-than-expected inflation prints — provided that the risk of second-round effects remains contained and price expectations stay well-anchored, according to Marco Casiraghi at Evercore.

“I think the real thing now to think about is should we get a 50 basis-point rate cut in September,” Treasury Secretary Scott Bessent told Fox Business. He said the Fed could have cut rates in June or July if they’d had the “original” jobs reports numbers.

With CPI out of the way, the focus will shift to Friday’s US retail sales figure, where investors will see if consumers appear as upbeat as corporate earnings commentary has made them seem and amid worries about the labor market, according to Bret Kenwell at eToro.

In Asia, China will implement more levies on Canadian rapeseed after an anti-dumping probe, escalating a trade spat that’s disrupted crop flows.

Elsewhere, Japan’s 10-year government bond traded on Wednesday morning after it wasn’t traded at all on Tuesday, the first such instance in over two years.

Corporate News:

• China Evergrande Group said its Hong Kong stock will be delisted, marking the end of an era for the former high-flying developer whose demise came to symbolize the country’s property bust.

• Commonwealth Bank of Australia profit met estimates as home-loan growth and lending to businesses supported the country’s biggest lender.

• Sea Ltd.’s American depositary receipts jumped after second-quarter sales beat analysts’ estimates as more of Southeast Asia’s consumers turned to online shopping.

• Kweichow Moutai Co. delivered its worst six-month growth in sales or profit in years as China’s top distiller struggled with weak consumer demand for premium beverages.

Some of the main moves in markets:

Stocks

• S&P 500 futures were little changed as of 9:17 a.m. Tokyo time

• Hang Seng futures rose 0.9%

• Japan’s Topix rose 0.4%

• Australia’s S&P/ASX 200 was little changed

• Euro Stoxx 50 futures rose 0.3%

Currencies

• The Bloomberg Dollar Spot Index was little changed

• The euro was little changed at $1.1673

• The Japanese yen was little changed at 147.85 per dollar

• The offshore yuan was little changed at 7.1855 per dollar

• The Australian dollar was little changed at $0.6526

Cryptocurrencies

• Bitcoin fell 0.1% to $120,038.83

• Ether fell 0.3% to $4,605.03

Bonds

• The yield on 10-year Treasuries was little changed at 4.30%

• Japan’s 10-year yield advanced three basis points to 1.515%

• Australia’s 10-year yield advanced two basis points to 4.26%

Commodities

• West Texas Intermediate crude was little changed

• Spot gold was little changed