Nikkei breaches 35,000, as Asia stocks gain ahead of US CPI
Business
Investors have been rethinking just how steep and early the Fed will cut rates
SINGAPORE (Reuters/Web Desk) – Asian stocks rose on Thursday ahead of US inflation data that could influence the Federal Reserve's thinking on rate cuts, while the crypto world got a boost after exchange-traded funds (ETFs) to track bitcoin were approved in the United States.
MSCI's broadest index of Asia-Pacific shares outside Japan was 0.67 per cent higher, on course to snap its seven-day losing streak.
Japan's Nikkei breached 35,000 for the first time since February 1990 in a blistering start to the year, after rising 28pc in 2023, its strongest yearly performance in a decade. The Nikkei was last up 1.77pc by the time trading was closed Thursday.
On the other hand, China stocks loitered near five-year lows as investor sentiment remained subdued. The blue-chip CSI 300 Index edged higher by 0.57pc, while Hong Kong's Hang Seng Index rose 1.27pc.
On Wednesday, US stocks closed higher as mega caps rallied, but gains were limited ahead of inflation reports and major bank earnings later in the week. E-mini futures for the S&P 500 rose 0.14pc.
Market attention has zeroed in on the US consumer price index report (CPI) due later on Thursday. Core CPI is forecast to remain unchanged at 0.3pc from the month before, while year-on-year inflation is expected to slow to 3.8pc from November's 4pc, a Reuters poll showed.
"The risk is that markets sell off on a strong print," said Ben Bennett, APAC investment strategist for Legal and General Investment Management (LGIM). "The reaction could be more muted if we get a soft number."
Investors have been rethinking just how steep and early the Fed will cut rates since the start of the year. Fed futures prices indicate traders anticipate 140 basis points of easing this year, compared with 160 bps of cuts expected at the end of 2023.
Markets are pricing in a 67pc chance of a rate cut in March, the CME FedWatch tool showed.
Federal Reserve Bank of New York President John Williams said on Wednesday it is still too soon to call for rate cuts as the central bank still has some distance to go on getting inflation back to its 2pc target.
LGIM's Bennett said that investors are underestimating the risk of a US recession. "Soft CPI prints could eventually become a sign of disappointing demand. But that's probably still a while away."
Investor focus will also be on the earnings season, with banking giants JPMorgan Chase, Bank of America, Citigroup and Wells Fargo all due to report earnings on Friday.
Meanwhile, the US securities regulator late on Wednesday approved the first US-listed ETFs to track bitcoin, in a watershed for the world's largest cryptocurrency, with most of the products expected to begin trading on Thursday.
Crypto-services firm Nexo co-founder Antoni Trenchev said the spot ETF news is possibly bitcoin's biggest since its launch but the approval shouldn't be viewed in isolation, given the timing of the upcoming halving in April which cuts the bitcoin supply and historically kick-starts the new bull market.
"Both these events combined could well send bitcoin to $100,000 in 2024."
On Thursday, bitcoin was little changed and a shade above $46,000, having surged more than 70pc since October in anticipation of the decision from the regulator.
