Asian equities and European futures surged on Friday following record highs in U.S. stocks, driven by in-line inflation data. Japan’s Nikkei benchmark hit an all-time high, nearing the 40,000 mark, recovering from a two-day slump. Chinese, Hong Kong, and Australian shares also witnessed gains as the Federal Reserve’s preferred inflation measure aligned with predictions.
Pruksa Iamthongthong, Abrdn’s Asia equities senior investment director, expressed optimism about rate cuts in the coming year. Iamthongthong highlighted the positive impact on non-U.S. dollar assets and Asian equities, emphasizing sustained growth in the region.
European and U.S. stock futures saw increases during Asian trading hours, supported by the S&P 500 and Nasdaq 100 indexes closing at record levels in February. Nvidia Corp., which achieved its highest closing price, contributed to the positive momentum. Treasuries remained steady, with a two-session gain attributed to softening jobless claims and potential short covering.
The yen weakened against the greenback after Bank of Japan Governor Kazuo Ueda suggested that the price target is not imminent, potentially delaying the bank’s first rate hike since 2007. South Korea’s markets were closed for a holiday.
In China, factory activity contracted for the fifth consecutive month in February, indicating persistent weak demand. However, non-manufacturing activity expanded, supported by increased travel and tourism during a recent extended holiday. Despite regulatory efforts, the country’s home sales continued to decline, with a 60% drop in the value of new home sales from major real estate companies.
The U.S. PCE report did not alter the broader disinflationary trend supporting rate-cut forecasts. Analysts, including Quincy Krosby at LPL Financial, emphasized confidence in the inevitability of rate cuts in 2024.
Federal Reserve officials provided mixed signals on interest rates. San Francisco Fed President Mary Daly stated readiness to lower rates if necessary, emphasizing the strong economy. Atlanta Fed President Raphael Bostic suggested the possibility of rate cuts starting in the summer. Cleveland Fed’s Loretta Mester acknowledged the need for further work to address inflation but maintained the expectation of three rate cuts this year.
Bitcoin held around $61,000, fueled by demand from exchange-traded funds. BlackRock Inc.’s iShares Bitcoin Trust attracted a record $612 million inflow on Wednesday.
West Texas Intermediate crude prices rose, supported by the U.S. Energy Information Administration’s report indicating a four-year high in oil demand in 2023. Gold steadied after reaching a three-week high around $2,045 per ounce.
Key economic events to watch include Eurozone S&P Global Manufacturing PMI, CPI, and unemployment data, BOE chief economist Huw Pill’s speech, and U.S. construction spending, ISM Manufacturing, and University of Michigan consumer sentiment reports.
Market Movements:
- S&P 500 futures rose 0.2%
- Nasdaq 100 futures rose 0.3%
- MSCI Asia Pacific Index rose 0.5%
- MSCI Emerging Markets Index rose 0.2%
- S&P/ASX 200 futures rose 0.7%
- Hang Seng rose 0.4%
- Shanghai Composite rose 0.3%
- Euro Stoxx 50 futures rose 0.5%
Currency and Cryptocurrency:
- Bloomberg Dollar Spot Index was little changed
- Euro was little changed at $1.0809
- Japanese yen fell 0.2% to 150.34 per dollar
- Offshore yuan was little changed at 7.2103 per dollar
- British pound was little changed at $1.2628
- Bitcoin rose 0.2% to $61,559.43
- Ether rose 1.2% to $3,389.7
Bonds:
- Yield on 10-year Treasuries was little changed at 4.25%
- Germany’s 10-year yield declined five basis points to 2.41%
- Britain’s 10-year yield declined six basis points to 4.12%
- Australia’s 10-year yield was little changed at 4.14%
Commodities:
- Spot gold rose 0.1% to $2,046.90 an ounce
- West Texas Intermediate crude rose 0.3% to $78.50 a barrel
