Asian markets continued their upward trend on Thursday, buoyed by news that US inflation had slowed down further last month. This data eased concerns among investors about the Federal Reserve’s plans to raise interest rates aggressively.
US Inflation Trends
The latest consumer price index for May showed a second consecutive month of deceleration, reaching its lowest point in over three years. This development raised optimism that the Federal Reserve might adopt a more accommodative stance towards monetary policy, contrasting with its previous strategy of tightening rates.
Federal Reserve’s Response
Later in the day, the Federal Reserve released its anticipated “dot plot” outlook on interest rates. This projection indicated that policymakers now expect only one rate cut this year, down from the three cuts predicted earlier in March. Looking ahead, they foresee a median of four cuts in 2025 and 2026.
Federal Reserve Chairman Jerome Powell acknowledged the positive inflation data but stressed the need for sustained improvements before considering further rate adjustments. Despite a cautious approach, analysts suggest that continued softening in inflation figures could prompt the Fed to act more decisively.
Market Reactions
Following the announcement, the S&P 500 and Nasdaq, while slightly off their intraday highs, still managed to achieve their third consecutive record closes. Analysts interpreted the data as potentially paving the way for more rate cuts by the Fed in the future.
Global Market Responses
Across Asia, markets responded positively to the news from Washington. Stocks in Hong Kong, Sydney, Seoul, Singapore, Wellington, Taipei, Manila, and Jakarta all saw gains. However, Tokyo and Shanghai experienced slight declines.
Currency and Commodity Markets
The US dollar struggled to recover against other major currencies in Asian trading following the news. Meanwhile, oil prices saw a marginal decrease, with West Texas Intermediate down 0.4% at $78.17 per barrel and Brent North Sea Crude down 0.4% at $82.28 per barrel.
Investors also monitored the euro’s performance, supported by French President Emmanuel Macron’s commitment to stabilise his political position amid internal challenges.
Current Market Figures (as of 0230 GMT)
- Tokyo – Nikkei 225: Down 0.1% at 38,831.36
- Hong Kong – Hang Seng Index: Up 0.7% at 18,054.53
- Shanghai – Composite: Down 0.2% at 3,031.45
- Euro/Dollar: Down at $1.0807
- Euro/Pound: Up at 84.50 pence
- Pound/Dollar: Down at $1.2788
- Dollar/Yen: Up at 156.93 yen
Overall, the Asian markets showed resilience amidst global economic shifts, driven by optimistic sentiments following the US inflation report.
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