Asia shares follow Wall Street’s advance on US inflation figures, Fed emphasis. Following Wall Street’s bullish day, Asian markets rose Tuesday as investors focused on U.S. inflation statistics and the Federal Reserve’s interest rate decision this week.
Investors will keenly follow U.S. consumer and producer inflation data on Tuesday and Wednesday to assess the Fed’s tightening cycle’s impact on rising prices.
Investors and strategists expected the Fed to suspend rate hikes for the first time since January 2022. Both inflation measures will fall this month, contributing to the equities index’s gains.
“Overall equity markets reacted positively to expectations the monetary policy cycle may be nearing its peak,” ANZ analysts wrote. “U.S. markets are now pricing a 72% probability that the Federal Reserve Monetary Policy Committee (FOMC) will hold rates at this week’s meeting.”
Euro Stoxx 50 futures rose 0.69%, German DAX futures rose 0.68%, and FTSE futures rose 0.41%.
MSCI’s broadest index of Asia-Pacific shares outside Japan (.MIAPJ0000PUS) climbed 0.8%, while S&P 500 e-minis rose 0.22%.
Technology equities drove the Nikkei index to a three-decade high, anticipating a wave of chip-related investment. In afternoon trade, the Nikkei (.N225) rose 1.89% to its highest closing since July 1990. AXJO is up 0.18%.
China’s markets recovered after the central bank cut a short-term policy lending rate on Tuesday to boost market confidence. Recent Chinese economic data showed reduced demand, dampening investor enthusiasm.
“I am afraid China’s monetary policy may become increasingly ineffective, due to low confidence and weak loan demand,” said Wang Qi, CEO of asset management MegaTrust Investments. “While it’s good to see more liquidity being pumped into the system, whether the private sector will leverage up remains to be seen.”
In afternoon trade, China’s blue-chip CSI300 index rose 0.11%. Hang Seng (.HIS) rose 0.23%.
The S&P 500 (.SPX) and Nasdaq (.IXIC) closed higher than in April 2022 on Monday.
The S&P 500 has recovered 21% from its October 2022 lows, fueled by market heavyweights Amazon (AMZN.O), Apple (AAPL.O), and Tesla (TSLA.O). Some market participants see this as the start of a new bull market.
The S&P 500 rose 0.93% to 4,338.93. The Dow Jones Industrial Average (.DJI) gained 0.56% and the Nasdaq 1.53%.
Investors are concerned about lengthy tightening cycles after the Reserve Bank of Australia and Bank of Canada unexpectedly raised rates last week.
Analysts predict the European Central Bank to hike rates by 25 basis points (bps) and imply additional ground to cover on Thursday. However, Friday’s Bank of Japan plan is expected to retain its ultra-loose policy.
The yield on benchmark 10-year Treasury notes rose to 3.7299% from 3.765% on Monday. Compared to the U.S. closing of 4.592%, the two-year yield reached 4.5605%.
The euro rose 0.3% to $1.0792, while the U.S. dollar index declined 0.21% to 103.36.
The dollar/yen fell 0.1% to 139.46. U.S. crude up 0.33% to $67.34. Brent crude hit $72.2. Gold rose. Spot gold was $1960.29.
