Asia Joins Global Equity Rally After US Inflation: Markets Wrap

Asia joined a global equity rally after relatively tame US inflation data and cooling jobs numbers clinched a path for the Federal Reserve to cut interest rates next week.

MSCI’s gauge of Asian shares rose for a seventh day and neared a fresh record, after the S&P 500 and Nasdaq 100 indexes both climbed to fresh closing highs in New York. A gauge of global stocks also hit a new record. Contracts for US equities were little changed Friday.

Microsoft Corp. shares climbed in post-market trading after the tech giant and OpenAI said they had reached an agreement, while Adobe Inc. shares also advanced in extended trading after it gave a strong quarterly revenue outlook. Elsewhere, Hyundai Motor Co. said a battery plant that was raided by US immigration authorities is being delayed as the companies faced labor shortages.

US consumer price index data showed core prices that strip out food and energy rose 0.3% in August and 3.1% from a year earlier, in line with economists forecasts. Alongside that report came jobless-claims figures, which jumped to the highest in almost four years, emboldening bets policymakers will lower rates at its Sept. 16-17 meeting in an effort to counter a rapid slowdown in the labor market.

“Inflation is relatively calm, which gives the Fed the flexibility to focus more on stemming ongoing weakness in the labor market,” said Skyler Weinand at Regan Capital. “We expect the Fed to cut 25 basis points next week and to follow through with another two 25 basis-point cuts this year.”

Treasuries broadly held on to gains made on Thursday when the US 10-year yield fell two basis points. Australian and New Zealand yields fell Friday, echoing the move. Bloomberg’s index of the dollar was steady. Gold stabilized after a small Thursday decline after eclipsing its inflation-adjusted peak set in 1980.

In Asia, data on the docket for release includes industrial production for Japan and inflation for India. Money supply and new loans data for China may be released any time through Sept. 15.

In China, investors will be closely watching the Hong Kong-listed shares in Alibaba Group Holdings Ltd. after the company’s US-listed depositary receipts rallied 8% Thursday.

Elsewhere, oil fell for a second day as a worsening market outlook undercut concerns about potential geopolitical disruptions to supplies.

US Rate Cuts

A slowing US jobs market has prompted markets to price a more aggressive trajectory of policy easing. Swaps pricing indicates traders anticipate the equivalent of between two or three 25 basis point cuts through year-end.

“Right now, inflation is a key subplot, but the labor market is still the main story,” said Ellen Zentner at Morgan Stanley Wealth Management. Thursday’s “CPI may appear to offset yesterday’s PPI, but it wasn’t hot enough to distract the Fed from the softening jobs picture. That translates into a rate cut next week — and, likely, more to come.”

While there may be some murmurs within the Fed about the need for a 50 basis-point cut, an emergency-sized reduction is not required, said Seema Shah at Principal Asset Management. Jobless claims are still quite low compared to 2021 levels, while the broader economic activity data and earnings reports do not signal the US is approaching a recessionary tipping point.

Some of the main moves in markets:

Stocks

• S&P 500 futures were little changed as of 9:06 a.m. Tokyo time

• Hang Seng futures rose 1.4%

• Japan’s Topix rose 0.5%

• Australia’s S&P/ASX 200 rose 0.5%

• Euro Stoxx 50 futures rose 0.5%

Currencies

• The Bloomberg Dollar Spot Index was little changed

• The euro was little changed at $1.1733

• The Japanese yen was little changed at 147.22 per dollar

• The offshore yuan was little changed at 7.1135 per dollar

Cryptocurrencies

• Bitcoin rose 1.1% to $115,718.39

• Ether rose 0.9% to $4,458.59

Bonds

• The yield on 10-year Treasuries was little changed at 4.03%

• Japan’s 10-year yield advanced one basis point to 1.575%

• Australia’s 10-year yield declined three basis points to 4.20%

Commodities

• West Texas Intermediate crude fell 0.3% to $62.17 a barrel

• Spot gold was little changed