(Bloomberg) — Shares in Asia were set to follow Wall Street higher after new data showed core inflation cooling in the US, keeping alive the prospect of Federal Reserve rate cuts this year.
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Equity futures for Australia, Japan and Hong Kong all rallied. The S&P 500 closed Wednesday 1.8% higher, the benchmark’s best day since the November election, which erased its 2025 decline. The tech-heavy Nasdaq 100 rose 2.3%.
Treasuries joined the rally, pushing 10-year yields 14 basis points lower during Wednesday’s session, easing fears that the benchmark rate may soon touch 5%. An index of the dollar fell as US yields slipped. The yen climbed 0.9% against the greenback, its strongest showing since November. Australian yields rose early Thursday.
The moves centered upon US core consumer price index data for December that rose less than forecast, reinvigorating bets the Fed will cut rates sooner than previously thought. Swap traders are back to fully pricing in a rate cut by July — a quick shift after Friday’s hot jobs data spurred bets officials would only be able to resume policy easing in September or October.
“Extreme sentiment led to a powerful post-CPI move,” said Steve Sosnick at Interactive Brokers. “The magnitude of the rallies reflected the jittery sentiment that had pervaded markets.”
The gains spread across asset classes and supported some of the most speculative corners of financial markets. Bitcoin again neared $100,000 and Goldman Sachs’ basket of money-losing tech companies rose 3.2%. The CBOE Vix index slumped the most this year and a Bloomberg measurement of the “Magnificent Seven” megacaps rallied 3.7%.
A gauge of commodity prices hit the highest level in almost two years against a mixed geopolitical backdrop as sanctions on Russia began to hit crude flows while a cease-fire between Israel and Hamas eased concerns over intensifying conflict.
West Texas Intermediate, the US oil price, surged almost 4% Wednesday to surpass $80 a barrel for the first time since August on tighter US inventories and curbs on Russia. Gold climbed 0.6% to around $2,694 per announce.
In Asia, data set for release includes producer prices in Japan, employment in Australia and a rate decision in South Korea. Bank of Korea is expected to cut borrowing costs 25 basis points to 2.75%.
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Later Thursday, the European Central Bank will release its meeting minutes while US data to be released includes initial jobless claims and retail sales, providing investors with a broader picture of the health of the world’s largest economy.
Cooling Inflation
The so-called US core consumer price index — which excludes food and energy costs — increased 0.2% in December. That marked the first stepdown in the rate in six months. From a year ago, it rose 3.2%. That’s still above the Fed’s 2% target.
“The market will be encouraged by the decrease in core inflation, which should alleviate some of the pressure on stock and bond markets, both of which have had a poor start to the year on inflation fears and concerns the Fed would not only stop cutting interest rates,” said Chris Zaccarelli at Northlight Asset Management.
This is the last inflation report of President Joe Biden’s tenure, an administration dogged by high prices coming out of the pandemic that surged a cumulative 20% while he was in office. Donald Trump will be sworn in next week, and economists generally anticipate his policies — particularly on tariffs — will put upward pressure on inflation, and measures of consumers’ expectations have been rising recently as well.
“The market is relieved that potential ‘nose-bleed’ interest rates are — for now — taken off the table and the bond market will not curtail the massive run we’ve seen over the last two years in the equity markets,” said John Kerschner at Janus Henderson Investors.
Key events this week:
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ECB releases account of December policy meeting, Thursday
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Bank of America, Morgan Stanley earnings, Thursday
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US initial jobless claims, retail sales, import prices, Thursday
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China GDP, property prices, retail sales, industrial production, Friday
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Eurozone CPI, Friday
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US housing starts, industrial production, Friday
Some of the main moves in markets:
Stocks
Currencies
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The Bloomberg Dollar Spot Index fell 0.2%
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The euro was little changed at $1.0291
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The Japanese yen was little changed at 156.40 per dollar
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The offshore yuan was little changed at 7.3482 per dollar
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The Australian dollar was little changed at $0.6225
Cryptocurrencies
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Bitcoin was little changed at $99,619.39
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Ether was little changed at $3,429.73
Bonds
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The yield on 10-year Treasuries declined 14 basis points to 4.65%
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Japan’s 10-year yield advanced one basis point to 1.250%
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Australia’s 10-year yield declined 10 basis points to 4.52%
Commodities
This story was produced with the assistance of Bloomberg Automation.
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