Asian markets are trending higher on anticipation of inflation data


Asian stocks enjoyed a broad uptrend following a rebound in U.S. stocks and a rise in bonds as investors awaited key inflation data that could influence the Federal Reserve's upcoming decisions.

Future trading pointed to a positive outlook for Hong Kong and Australia, although Japan saw a slight decline. This comes amid a quieter trading atmosphere due to a public holiday in Singapore. The S&P 500 recovered from an initial decline and closed slightly higher. Meanwhile, Treasury yields fell after peaking this year.

With no major economic reports due, market participants are preparing for the release of the consumer price index on Wednesday. This expectation comes as market expectations for rate cuts by the Federal Reserve are adjusting in response to continued economic strength and official statements suggesting a cautious approach to easing.

“The resilience of the economy raises doubts about a policy change in June,” noted Marta Norton of Morningstar Wealth, pointing to the possibility of a delayed turnaround if inflation data beats expectations.

Despite a challenging trading session, the S&P 500 rose, buoyed by significant gains in Tesla Inc. In turn, Nvidia Corp suffered a downturn as Intel Corp announced its latest artificial intelligence chip. The 10-year U.S. Treasury yield fell while oil prices fell on diplomatic developments in the Middle East. Gold, on the other hand, reached a new high.

Central banks in New Zealand and Thailand are poised to maintain current interest rates at their upcoming meetings.

“The CPI data is critical,” said Andrew Brenner of NatAlliance Securities, highlighting the ongoing challenge that inflation poses to the Fed’s strategy. Reflecting on market sentiment, he noted that the outcome that is most damaging to the majority's position often prevails.

Speculation suggests the Fed could cut interest rates by about 65 basis points by year-end, less than previously forecast. Atlanta Fed President Raphael Bostic expressed openness to adjusting his expectations based on economic changes, while Queens' College's Mohamed El-Erian expects the need for higher inflation forecasts based on evolving macroeconomic conditions.

Despite possible volatility in bond yields, UBS's Solita Marcelli sees a favorable risk-reward scenario for quality bonds and advocates investing in government bonds and investment-grade corporate bonds, with an emphasis on sustainable options.

Corporate news included Boeing Co's shares falling following a safety investigation report, Pfizer Inc's progress toward broader U.S. approval of its RSV vaccine and Morgan Stanley's positive rerating of Cisco Systems Inc. Additionally, Google and Best Buy Co are using artificial intelligence to improve their offerings, while a tragic explosion occurred at an Enel SpA hydroelectric power plant in Italy.

Upcoming events include interest rate decisions, the release of CPI data and speeches from several Federal Reserve officials, as well as earnings reports from major banks.

Market action saw a mix of gains and declines across stocks, currencies and commodities, with particular attention paid to futures and the performance of major indices.

This reporting is the result of collaborative efforts and automated technology from Bloomberg.