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Asian stocks rose on Thursday after U.S. inflation data cleared the way for the Federal Reserve to cut interest rates again next week.
The inflation rate in the world’s largest economy was 2.7% in November, higher than last month but in line with market expectations, reinforcing expectations of a 25 basis point interest rate cut in December.
Asian shares, led by Japan and China, were buoyed by gains in U.S. stocks and Asian currencies strengthened against the dollar as investors prepared for lower interest rates.
Japan’s export-focused Nikkei 225 index closed up 1.2%, while China’s blue-chip CSI 300 index rose 1% to exceed 4,000 points. Hong Kong’s Hang Seng Index rose 1.6%.
China’s benchmark 10-year government bond yield fell nearly two basis points to 1.814%, and the spread with the U.S. 10-year government bond yield widened to nearly 250 basis points. Bond yields are inversely related to prices. The offshore yuan is hovering at 7.27 yuan to the dollar.
“The moves in Asia are pretty solid and there are risks,” said Mitul Kotecha, head of emerging markets and macro strategy at Barclays. “There’s been a strong reaction in the U.S., especially in tech stocks — and Asian markets are reacting to that as well. Inflation data Conducive to further continued easing – it’s a not too hot, not too cold situation, which is good for the market.
The Nasdaq 100 closed up 1.9% as U.S. technology stocks rose, with the tech-heavy Nasdaq closing above 20,000 points for the first time.
Jason Lui, head of Asia-Pacific equity and derivatives strategy at BNP Paribas, said: “In Japan, South Korea and Taiwan, the rise of large U.S. technology companies is driving the development of the semiconductor industry.”
The dollar fell 0.15% against a basket of currencies including sterling and the yen. The index has surged since Donald Trump won the November presidential election on bets he will introduce more trade tariffs and ease fiscal policy.
Analysts added that other factors were also driving Chinese stocks higher.
“For Hong Kong and Chinese stock markets, investors’ expectations for the outcome of the Central Economic Work Conference continued to rise and became more positive after the Politburo issued a statement on promoting growth,” Lei said.
The Political Bureau of the Communist Party of China Central Committee led by Xi Jinping on Monday adjusted the stance of monetary policy from “stable” to “moderately loose” for the first time in 14 years.
Taiwan’s benchmark stock index rose 0.6% and South Korea’s Kospi rose 1.1%.
Additional reporting by Cheng Leng in Hong Kong
