Asia gains, US stocks hit record on inflation data: Markets wrap

Asian equities gained, led by Japan, on Friday after US stocks hit records on the back of in-line inflation data.

The Nikkei benchmark of Japanese stocks rose as much as 1.9% to an all-time high after a two-day losing streak. Chinese, Hong Kong and Australian shares rose. The moves came after the Federal Reserve’s preferred inflation measure on personal consumption expenditures matched forecasts.

“As we look forward to rate cuts this year and we can debate on what the PCE inflation numbers mean, that should be good news for non-US dollar assets — and Asian equities as well, where we still see growth on the ground,” said Pruksa Iamthongthong, Abrdn’s Asia equities senior investment director.

US stock futures were steady after both the S&P 500 and Nasdaq 100 indexes closed at record levels, helped by Nvidia Corp., which also set its highest closing price on the day. The two benchmarks ended February with their fourth consecutive monthly advance.

Treasuries rose of a third straight session, helped along by jobless claims data that indicated labour-market softening. Traders also pointed to the possibility that short covering was behind the gains. An index of the dollar was little changed.

The yen weakened against the greenback Friday after Bank of Japan Governor Kazuo Ueda said its price target is not already in sight. His comment may temper speculation the bank’s first rate hike since 2007 could come as early as March.

“We are not yet in a position to foresee the achievement of a sustainable and stable inflation target,” Ueda said on Thursday after meeting with Group of 20 central bankers and finance chiefs in Sao Paulo, Brazil. “We will continue to seek confirmation whether the virtuous cycle between wages and price began to turn.”

Markets are closed Friday in South Korea for a holiday.

China’s factory activity shrank for the fifth straight month in February, suggesting weak demand remains an obstacle for the economy. A gauge of non-manufacturing activity was in expansion mode, helped by a pickup in travel and tourism during a recent long holiday.

The country’s home-sales slump dragged on in February, even as regulators stepped up efforts to salvage the beleaguered property market. The value of new home sales from the 100 biggest real estate companies slid 60% from a year earlier.

Meanwhile, the US PCE report failed to dent the broader disinflationary trend underpinning rate-cut forecasts.

“For markets keenly focused on when the Fed will transition toward easing rates, this report will help restore confidence that it isn’t ‘if’ the Fed will begin to cut rates in 2024, but ‘when,’” said Quincy Krosby at LPL Financial.

Federal Reserve Bank of San Francisco President Mary Daly said central bank officials are ready to lower interest rates as needed but emphasized there’s no urgent need to cut given the strength of the economy. Her Atlanta counterpart Raphael Bostic said the central bank could begin cutting this summer.

The Cleveland Fed’s Loretta Mester said inflation data out Thursday showed that policymakers have more work to do to cool price pressures, but said it didn’t change her expectation that the Fed will cut interest rates three times this year.

Bitcoin held around $61,000 as demand from exchange-traded funds continues. BlackRock Inc.’s iShares Bitcoin Trust netted a record $612 million inflow on Wednesday.

West Texas Intermediate crude was little changed Friday. The US Energy Information Administration said oil demand touched a four-year high in 2023 and would likely hold near that level this year. Elsewhere, gold steadied after rising to a three-week high around $2,045 per ounce.

Key Events This Week:

Eurozone S&P Global Manufacturing PMI, CPI, unemployment, Friday
BOE chief economist Huw Pill speaks, Friday
US construction spending, ISM Manufacturing, University of Michigan consumer sentiment, Friday
Fed’s Raphael Bostic and Mary Daly speak, Friday

Some of the main moves in markets: