Stocks stride past US inflation to milestone highs

By Thomson Reuters Mar 12, 2024 | 9:16 PM

By Tom Westbrook

SINGAPORE (Reuters) – Asian shares notched seven month highs on Wednesday, on the back of record peaks on Wall Street, as investors mostly shrugged off slightly hotter-than-expected U.S. inflation, betting it won’t derail interest rate cuts expected by the middle of the year.

A Reuters report earlier in the week that China had asked banks to enhance financial support for developer China Vanke has also put support beneath Hong Kong stocks. [.HK]

MSCI’s broadest index of Asia-Pacific shares outside Japan rose 0.2% to its highest level since early August. The Hang Seng advanced 0.4% to 3-1/2 month highs.

Tokyo’s Nikkei was steady and focus in Japan is on springtime wage negotiations underway this week, with pay hikes seen encouraging an exit from negative interest rates perhaps as early as next week. [.T]

Overnight data showed U.S. consumer prices increased a solid 0.36% in February against expectations for a 0.3% rise, amid higher costs for fuel and shelter, though on an annual basis core CPI slowed slightly to 3.8%.

“It does not blow a mid-2024 rate cut out of the water,” said Vishnu Varathan, chief economist for Asia excluding Japan at Mizuho Bank in Singapore. “Despite bumpiness in the path, the direction of travel is consistent.”

U.S. Treasury yields rose after the reading, with two-year yields finishing the New York session 6.5 basis points higher at 4.599% and 10-year yields climbing 5.1 bps to 4.155%. Early trade in Tokyo was steady. [US/]

Interest rate futures also fell slightly in response, though pricing for June slipped only marginally to imply about a 68% chance of a cut and U.S. stock indexes – after hesitating – surged to record highs.

“Equity markets were braced for worse or were not listening,” noted National Australia Bank economist Taylor Nugent.

The S&P 500 rose 1.1% to log a record closing high. Shares of database giant Oracle rose 12% after the company beat profit estimates and mentioned an upcoming join announcement with market darling Nvidia.

“You can’t keep AI/tech down for long,” said Pepperstone analyst Chris Weston, noting options trade showed calls at a premium to puts, showing traders see upside ahead.

In foreign exchange, the move upwards in U.S. yields gave a little support to the dollar, but traders mostly took the inflation surprise in their stride. The Aussie dollar was steady at $0.6603 and the euro at $1.0952.

The yen, which has been lifted from lows by growing expectations of a rate rise in Japan was about 0.2% firmer at 147.33 per dollar as news of wage hikes at large companies was rolling in.

“We think the rate lift-off could happen in the March meeting, following the annual wage negotiation outcome to be announced this Friday,” said MUFG analyst Lloyd Chan.

“(The yen) is consolidating its recent strength versus the U.S. dollar at around 147.60 level.”

In commodities, higher yields yanked gold from near record levels and it was last at $2,157 an ounce. Crude futures have been rangebound for several weeks. Brent was last 0.5% stronger at $82.36 a barrel. [GOL/][O/R]

Bitcoin touched a record $72,989 overnight.