Asia gains, US stocks hit record on inflation data: markets soar

Asian markets experienced gains, led by Japan, on Friday following record-breaking performances by US stocks on the heels of in-line inflation data.

The Nikkei, Japan’s stock benchmark, surged by as much as 1.9% to reach an all-time high after a brief two-day dip. Chinese, Hong Kong, and Australian shares also saw increases. These movements came after the Federal Reserve’s preferred inflation gauge on personal consumption expenditures aligned with expectations.

In the US, stock futures remained steady after both the S&P 500 and Nasdaq 100 indices closed at historic levels, supported by Nvidia Corp., which achieved its highest closing price to date. February marked the fourth consecutive month of gains for these two key benchmarks.

Treasury bonds climbed for the third consecutive session, buoyed by softening labor market indicators from jobless claims data. Some traders suggested that short covering contributed to the gains. The dollar index remained relatively unchanged.

The yen depreciated against the dollar on Friday following remarks from Bank of Japan Governor Kazuo Ueda, who stated that the bank’s price target is not yet within reach. This statement may dampen speculation that the bank’s first rate hike since 2007 could happen as soon as March.

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Market closures were observed on Friday in South Korea due to a holiday.

In China, factory activity contracted for the fifth consecutive month in February, indicating persistent weak demand as an economic challenge. However, a gauge of non-manufacturing activity showed expansion, boosted by increased travel and tourism during a recent extended holiday period.

Despite regulatory efforts to revive the struggling property market, China’s home sales continued to decline in February. The value of new home sales from the largest 100 real estate companies dropped by 60% compared to the previous year.

Meanwhile, the US PCE (Personal Consumption Expenditures) report did not alter the broader trend of disinflation, supporting predictions of rate cuts.

President of the Federal Reserve Bank of San Francisco, Mary Daly, stated that central bank officials are prepared to reduce interest rates if necessary but stressed that there is no urgent need given the robust state of the economy. Raphael Bostic, her counterpart in Atlanta, suggested the central bank could commence rate cuts as early as this summer.

Loretta Mester of the Cleveland Fed remarked that Thursday’s inflation data highlighted the ongoing need to address price pressures. However, she maintained her expectation that the Fed would lower interest rates three times throughout the year.

Bitcoin remained around $61,000 with continued demand from exchange-traded funds. BlackRock Inc.’s iShares Bitcoin Trust saw a record inflow of $612 million on Wednesday.

West Texas Intermediate crude oil prices remained relatively stable on Friday. The US Energy Information Administration reported that oil demand reached a four-year peak in 2023 and was anticipated to remain at similar levels this year. Meanwhile, gold prices steadied after reaching a three-week high of around $2,045 per ounce.