Asian equities were primed for some losses early Thursday after a fairly muted Wall Street reaction to in-line US inflation data that still supported expectations for Federal Reserve rate cuts.
Equity futures in Japan and Hong Kong fell, while those in Australia advanced and US contracts were little changed. The S&P 500 closed 0.4% higher Wednesday, while the Nasdaq 100 added 0.1%, after year-on-year core consumer prices — which excludes food and energy costs — increased at the slowest pace since early 2021 in July.
The inflation print was broadly in line with expectations and bolstered forecasts for a Federal Reserve rate cut next month. The swaps market is currently fully pricing in one 25 basis point cut in September and 100 basis points of cuts through to the end of the year — indicating a degree of confidence that the Fed will deliver one 50 basis point cut in the remaining three Fed meetings of 2024.
Treasuries ended Wednesday little changed, as did an index of the dollar, while the yen weakened slightly against the greenback to trade at 147 per dollar. The Japanese currency was little changed early Thursday. Australia’s 10-year yield edged lower in early trading.
At Evercore, Krishna Guha said the US CPI wasn’t perfect, but it was good enough as it was consistent with a tame read on the Fed’s preferred inflation measure. In addition, the central bank has disavowed data-point dependence, and is looking at the wider outlook and balance of risks.
Source: Bloomberg
