Asian markets mostly reflected positive sentiments from Wall Street in early Thursday trading. US consumer inflation showed signs of easing, raising hopes for a significant interest rate cut, while Japan’s economic growth surpassed expectations.
Data released on Wednesday revealed a 2.9 percent increase in the US consumer price index over the past year – the smallest rise since March 2021. This development sets the stage for the Federal Reserve to consider cutting interest rates. Traders are optimistic about a potential cut in the September meeting, with some speculating it could be as high as 50 basis points, exceeding the expected 25.
Stephen Innes from SPI Asset Management noted, “The current discussion isn’t about whether the Fed will cut rates at their significant September 17-18 meeting but rather about the extent of the cuts.”
Japan’s positive growth figures led the Asian market surge, with the Nikkei 225 index climbing. The world’s fourth-largest economy reported a 0.8 percent increase in GDP for the second quarter, exceeding expectations. This news followed Prime Minister Fumio Kishida’s announcement of his resignation next month due to falling poll ratings and various scandals.
Hiroyuki Ueno, chief strategist at SuMi Trust, commented, “Consumer sentiment should have improved as real wages turned positive with promised wage increases being paid. Additionally, the recovery in shipments by some automakers, which were temporarily suspended in May, likely boosted consumer spending.”
In contrast, China’s economic news was less encouraging. Industrial production slowed, consumer spending rose slightly, and unemployment increased in July. This data dampened hopes for an economic revival in Asia’s largest market.
Innes observed, “This snapshot of a once thriving economy highlights a persistent drag on domestic demand. Government initiatives to boost consumption and address recovery imbalances have not significantly alleviated the situation. No amount of rate cutting seems to entice consumer spending if confidence in the economy or personal financial security is lacking.”
Despite the US inflation, Shanghai saw gains in early trading, and Hong Kong also edged up after a slow start. Seoul, Sydney, and Singapore markets rose, while Taipei and Jakarta saw declines.
Market indices were as follows:
– Tokyo – Nikkei 225: UP 1.0 percent at 36,808.75
– Hong Kong – Hang Seng Index: UP 1.0 percent at 17,281.35
– Shanghai – Composite: UP 1.2 percent at 2,884.92
Currency and commodity prices showed slight variations:
– Euro/dollar: DOWN at 1.1008 from $1.1012 on Tuesday
– Pound/dollar: UP at $1.2830 from $1.2829
– Dollar/yen: UP at 147.46 yen from 147.43 yen
– Euro/pound: DOWN at 85.80 pence from 85.83 pence
– West Texas Intermediate: UP 0.39 percent at $77.28 per barrel
– Brent North Sea Crude: UP 0.36 percent at $80.01 per barrel
In other markets:
– New York – Dow: UP 0.6 percent at 40,008.39 points
– London – FTSE 100: UP 0.6 percent at 8,281.05
Frequently Asked Questions
Here are some common questions asked about this news
Why did Asian markets rise recently?
Easing US consumer inflation and stronger-than-expected economic growth in Japan boosted market optimism.
What did the US consumer price index indicate?
The US consumer price index showed a 2.9% rise, the smallest 12-month increase since March 2021.
How did Japan’s economy perform in the second quarter?
Japan reported a better-than-expected GDP rise of 0.8% for the second quarter.
What is the market expectation for the Federal Reserve’s next move?
Traders are optimistic about a potential interest rate cut, possibly exceeding 25 basis points.
What are the recent economic concerns in China?
China’s industrial production slowed, consumer spending ticked up marginally, and unemployment rose.