Asian shares bounced on Thursday, tracking a tech-driven rally on Wall Street, while the dollar held onto gains after U.S. core inflation surprised slightly on the upside and dashed hopes of a large rate cut by the Federal Reserve next week.
Investors are now awaiting a policy decision from the European Central Bank later in the day where a rate cut is almost a certainty, but the question remains whether it would move again in both October and December.
MSCI's broadest index of Asia-Pacific shares outside Japan rallied 1%. The Nikkei jumped 3%, helped by a weaker yen, which pulled back from its 2024 high of 140.71 per dollar.
Earlier in Asian trade, the yen had eased further to a low of 142.95, but was last flat at 142.40 per dollar, perhaps helped a little by hawkish comments from a senior Bank of Japan official who called for raising rates at least to 1%.
EUROSTOXX 50 futures rose 1.2% while FTSE futures gained 0.9%. U.S. stock futures were slightly lower.
Overnight, U.S. data showed core consumer price index (CPI) rose 0.28% in August, compared with forecasts for a rise of 0.2%. It was enough of a steer for markets to almost abandon the chance of a half-point rate cut from the Federal Reserve next week, with probability for such a move at just 15%.
"We wanted answers to help settle the 25bp vs 50bp Fed rate cut debate on Friday, but now it seems the market has made its own mind up," said Chris Weston, head of research at Pepperstone, referring to the mixed August payrolls report last Friday.
"We are now comfortable with calling a 25bp cut for September, but also open-minded to the idea that a weak U.S. payrolls report on 4 October would fully open up a 50bp cut in the November FOMC meeting."
The disappointment over core inflation figures had pressured Wall Street but again tech stocks came to the rescue, with AI darling Nividia jumping 8%, helped by a media report that the U.S. government is considering letting the company export advanced chips to Saudi Arabia. [.N]
Regional tech-heavy sharemarkets followed suit, with Taiwan adding 2.2% and South Korea gaining 1.1%.
China's sharemarkets were subdued, while Hong Kong's Hang Seng edged 0.4% higher.
In the foreign exchange market, the dollar traded near a four-week high versus the euro, which eased to $1.1007, sticking close to Wednesday's low of $1.1002 - the weakest since Aug. 16. [FRX/]
Short-dated U.S. Treasuries sold off overnight. Two-year Treasury yields held at 3.3193%, having risen 4 basis points overnight, while ten-year yields were at 3.3291%.
That left the 2-10-year yield curve flattening slightly and barely remaining positive at just 1 bp.
Oil bounced overnight on fears that Hurricane Francine could lead to lengthy production shutdowns in U.S. [O/R]
Brent crude futures held at $70.65 a barrel, after gaining 2% overnight. It also found support at $68.69, the lowest level in almost three years.
Gold traded at $2,513.75 an ounce, just a touch below its record high of $2,531.60.
Source: Investing