Asian shares firmer after US inflation better than expected

Hong Kong — Asian shares rose on Wednesday boosted by US inflation figures that fared better than markets’ worst expectations — and caused US yields to pause their march higher — though Chinese shares remained under pressure by Covid-19.

Share market sentiment was also capped by gains in oil and other commodity prices after Russian President Vladimir Putin said that on-and-off peace negotiations “have again returned to a dead-end situation for us”, which also hurt the euro.

MSCI’s broadest index of Asia-Pacific shares outside Japan rose 0.5% and Japan’s Nikkei jumped 1.54%.

S&P 500 futures gained 0.2% and Nasdaq futures gained 0.57% in Asia trade.

Data published on Tuesday showed US monthly consumer prices increased by the most in 16-and-a-half years in March as war in Ukraine boosted the cost of petrol to record highs, cementing the case for a 50 basis points (bps) interest rate hike from the Federal Reserve in May.

However, monthly underlying inflation pressures moderated as goods prices, excluding food and energy, dropped by the most in two years.

The inflation data sent US yields lower on Tuesday snapping seven consecutive sessions of gains, though they regained a little ground late in the day and into early trade on Wednesday.

The yield on 10-year treasury notes was at 2.7498%, compared with a more than three-year peak of 2.836%, before the inflation data.

The two year yield was 2.4362%.

The moves in yields “gave a nod to the rhetoric that US inflation has likely peaked or is very close to it”, said Clara Cheong, a strategist at JPMorgan Asset Management.

“While this is unlikely to change the trajectory of the Fed from hiking 50 bps in May, if inflation continues on this path there will be less pressure on them to be overly aggressive in the second half of the year.”

“However equity markets gave back gains as oil rose back above $100 barrel as progress in Russia-Ukraine peace talks came to a standstill and China started reopening Shanghai very gradually.”

Brent crude briefly dropped below $100 earlier this week, but rallied sharply on Tuesday, and gains continued into Wednesday trade.

Brent crude futures gained 0.38% on Wednesday to $105.09 and US West Texas Intermediate rose 0.55% to $101.12.

Commodities analysts at CBA attributed the gains in oil to Putin’s statement, which also caused agricultural commodities to gain, as “the already small risk that Black Sea supplies might normalise to any degree through midyear is likely down to zero”.

Corn futures rose to a one month high and wheat futures reached a three week peak.

Chinese share markets gave back their gains from Tuesday afternoon when tourism and consumer goods stocks had jumped on reports that Covid-19 curbs could be eased in some pilot areas.

Chinese blue chips fell 0.7% and Hong Kong lost 0.2%. They were little changed by Wednesday customs data which showed China’s exports rose 13.4% in yuan terms year on year in January-March, while imports increased 7.5%.

China reported 26,525 new asymptomatic coronavirus cases and 1,513 symptomatic ones on Wednesday.

Putin's remarks were a major driver of currency markets with the euro pinned to a five-week low on and commodity currencies finding support as oil prices rose.

The New Zealand dollar was at $0.6873 up 0.33%, after the Reserve Bank of New Zealand raised interest rates by a chunky 50 bps. It briefly rose as high as $0.6901 Spot gold edged 0.1% higher to $1,968/oz.

Reuters