Stocks reach record highs ahead of US inflation data

Asian stocks surged to record highs on Thursday, while the British pound hit a four-month high due to robust growth figures. This rally came as traders awaited U.S. inflation data expected to indicate easing inflation, potentially leading to interest rate cuts as early as September, News.Az reports citing Reuters.

U.S. shares hit record highs on Wednesday and futures were flat through the Asia session. Bonds and the dollar were broadly steady, keeping the yen on the weak side of 161 per dollar and near its lowest levels in decades.

Japan's Nikkei rose 1% to a record high of 42,426.

MSCI's broadest index of Asia-Pacific shares outside Japan gained 1.2% to a two-year high. Taiwan stocks (.TWII) hit a record peak and Australia's ASX 200 (.AXJO) closed within a whisker of its all-time top.

"The main driver is really the prospect of interest rate cuts," said Shane Oliver, chief economist and head of investment strategy at AMP in Sydney. "If we get a good inflation read, it will tick one of Powell's boxes."

U.S. Federal Reserve Chair Jerome Powell told lawmakers on Capitol Hill overnight that "more good data" would build the case for the U.S. central bank to cut interest rates. Futures pricing implies about a 75% chance of a cut in September.

Economists forecast annual U.S. CPI slowed to 3.1% in June from 3.3% in May.

The Bank of Korea stood pat on interest rates but left out a warning on inflation, while Governor Rhee Chang-yong told reporters that it was time to prepare to pivot to rate cuts.

A shift in tone at the Reserve Bank of New Zealand on Wednesday led to a sharp re-pricing in rate-cut expectations, with the benchmark two-year swap rate diving 18 basis points and the currency sliding.

Malaysia is expected to hold rates steady later in the day, and the U.S. earnings season will also begin with results from Delta Air Lines and consumer bellwether PepsiCo followed by bank results on Friday.

China stocks chimed with the market momentum on Thursday, but a drumbeat of disappointing data and talk of tariffs in its major export markets have made rallies hard to sustain. China GDP print is due on Monday.
Hong Kong's Hang Seng rose 1%, and on the mainland, the blue-chip CSI300 climbed 1.1% although it remains huddled pretty close to Tuesday's four-and-a-half-month low.

China's yuan rallied from an almost eight-month low to 7.2701 per dollar.

News.Az