Dollar holds onto gains after US core inflation surprises slightly on the upside and dashes hopes of a large rate cut
12 September 2024 - 08:16
byStella Qiu
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A passerby walks past Japan's Nikkei stock prices quotation board outside a brokerage in Tokyo, Japan. Picture: ISSEI KATO/REUTERS
Sydney — Asian shares bounced on Thursday, tracking a tech-driven rally on Wall Street, while the dollar held onto gains after US core inflation surprised slightly on the upside and dashed hopes of a large rate cut by the Federal Reserve next week.
Investors are now awaiting a policy decision from the European Central Bank (CB) later in the day where a rate cut is almost a certainty, but the question remains whether it would move again in both October and December.
Europe is set for solid gains ahead of the ECB risk event, with Eurostoxx 50 futures jumping 1.3% and FTSE futures gaining 1.1%. Nasdaq futures also turned higher, last up 0.3%.
MSCI’s broadest index of Asia-Pacific shares outside Japan rallied 1.5%. The Nikkei jumped 3.3%, helped by a weaker yen, which pulled back from its 2024 high of ¥140.71 to the dollar.
The dollar was last up another 0.3% to ¥142.75, having been pressured earlier by hawkish comments from a senior Bank of Japan official who called for raising rates at least to 1%.
Overnight, US data showed core consumer price index (CPI) rose 0.28% in August, compared with forecasts for a rise of 0.2%. It was enough of a steer for markets to almost abandon the chance of a half-point rate cut from the Federal Reserve next week, with probability for such a move at just 15%.
“We wanted answers to help settle the 25 basis point [bp] versus 50bp Fed rate cut debate on Friday, but now it seems the market has made its own mind up,” said Chris Weston, head of research at Pepperstone, referring to the mixed August payrolls report last Friday.
“We are now comfortable with calling a 25bp cut for September, but also open-minded to the idea that a weak US payrolls report on 4 October would fully open up a 50bp cut in the November FOMC meeting.”
The disappointment over core inflation figures had pressured Wall Street but again tech stocks came to the rescue, with AI darling Nividia jumping 8%, helped by a media report that the US government is considering letting the company export advanced chips to Saudi Arabia.
Regional tech-heavy sharemarkets followed suit, with Taiwan adding 2.8% and South Korea gaining 1.7%.
China’s share markets were subdued, while Hong Kong's Hang Seng moved 1.2% higher.
In the foreign exchange market, the dollar traded near a four-week high versus the euro, which eased to $1.1015, not far from Wednesday's low of $1.1002 — the weakest since Aug. 16.
Short-dated US treasuries sold off overnight. Two-year Treasury yields edged up 1 basis point to 3.66%, having risen 4bps overnight, while 10-year yields were at 3.6665%.
That left the two to 10 year yield curve flattening slightly and barely remaining positive at less than 1bp.
Oil extended gains on fears that Hurricane Francine could lead to lengthy production shutdowns in US
Brent crude futures rose 0.7% to $71.09 a barrel, after gaining 2% overnight. It also found support at $68.69, the lowest level in almost three years.
Gold was 0.2% higher at $2,517.89/oz, just a touch below its record high of $2,531.60.
Support our award-winning journalism. The Premium package (digital only) is R30 for the first month and thereafter you pay R129 p/m now ad-free for all subscribers.
Wall Street tech rally lifts Asian shares
Dollar holds onto gains after US core inflation surprises slightly on the upside and dashes hopes of a large rate cut
Sydney — Asian shares bounced on Thursday, tracking a tech-driven rally on Wall Street, while the dollar held onto gains after US core inflation surprised slightly on the upside and dashed hopes of a large rate cut by the Federal Reserve next week.
Investors are now awaiting a policy decision from the European Central Bank (CB) later in the day where a rate cut is almost a certainty, but the question remains whether it would move again in both October and December.
Europe is set for solid gains ahead of the ECB risk event, with Eurostoxx 50 futures jumping 1.3% and FTSE futures gaining 1.1%. Nasdaq futures also turned higher, last up 0.3%.
MSCI’s broadest index of Asia-Pacific shares outside Japan rallied 1.5%. The Nikkei jumped 3.3%, helped by a weaker yen, which pulled back from its 2024 high of ¥140.71 to the dollar.
The dollar was last up another 0.3% to ¥142.75, having been pressured earlier by hawkish comments from a senior Bank of Japan official who called for raising rates at least to 1%.
Overnight, US data showed core consumer price index (CPI) rose 0.28% in August, compared with forecasts for a rise of 0.2%. It was enough of a steer for markets to almost abandon the chance of a half-point rate cut from the Federal Reserve next week, with probability for such a move at just 15%.
“We wanted answers to help settle the 25 basis point [bp] versus 50bp Fed rate cut debate on Friday, but now it seems the market has made its own mind up,” said Chris Weston, head of research at Pepperstone, referring to the mixed August payrolls report last Friday.
“We are now comfortable with calling a 25bp cut for September, but also open-minded to the idea that a weak US payrolls report on 4 October would fully open up a 50bp cut in the November FOMC meeting.”
The disappointment over core inflation figures had pressured Wall Street but again tech stocks came to the rescue, with AI darling Nividia jumping 8%, helped by a media report that the US government is considering letting the company export advanced chips to Saudi Arabia.
Regional tech-heavy sharemarkets followed suit, with Taiwan adding 2.8% and South Korea gaining 1.7%.
China’s share markets were subdued, while Hong Kong's Hang Seng moved 1.2% higher.
In the foreign exchange market, the dollar traded near a four-week high versus the euro, which eased to $1.1015, not far from Wednesday's low of $1.1002 — the weakest since Aug. 16.
Short-dated US treasuries sold off overnight. Two-year Treasury yields edged up 1 basis point to 3.66%, having risen 4bps overnight, while 10-year yields were at 3.6665%.
That left the two to 10 year yield curve flattening slightly and barely remaining positive at less than 1bp.
Oil extended gains on fears that Hurricane Francine could lead to lengthy production shutdowns in US
Brent crude futures rose 0.7% to $71.09 a barrel, after gaining 2% overnight. It also found support at $68.69, the lowest level in almost three years.
Gold was 0.2% higher at $2,517.89/oz, just a touch below its record high of $2,531.60.
Reuters
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