Asian stocks rose on Thursday after a lackluster Wednesday as investors eyed upcoming U.S. inflation data, with Tokyo's benchmark reaching its highest level in over 30 years.
A Reuters poll of economists anticipates the core U.S. consumer price index (CPI) to remain unchanged from November's 0.3 percent monthly increase. Year-on-year inflation is projected to cool to 3.8 percent from 4.0 percent in November.
Investors' outlook on potential rate cuts by the Federal Reserve has shifted since the year began. Fed futures prices signal traders expect around 140 basis points of rate cuts throughout 2024, down from roughly 160 basis points anticipated around year-end 2023. Based on the CME FedWatch tool, markets now price in a 67 percent chance of a rate cut in March.
However, New York Fed president John Williams cautioned on Wednesday that the central bank's work on curbing inflation toward its two percent target isn't finished. At current conditions, rate cuts are too soon.
U.S. stocks closed higher on Wednesday, propelled by strong performances from mega-cap companies. However, anxieties surrounding upcoming inflation reports and major bank earnings, such as JPMorgan Chase (JPM.N), Bank of America (BAC.N), Citigroup (C.N) and Wells Fargo (WFC.N), later in the week kept broader gains in check.
The S&P 500 climbed 0.6 percent to 4,783.45, just 0.3 percent shy of its record high. Meanwhile, the Dow Jones Industrial Average rose 0.5 percent to 37,695.73 and the Nasdaq Composite advanced 0.8 percent to 14,969.65.
Thursday also sees a packed schedule in Asian markets. The Bank of Korea's policy on any hints regarding the timing of a potential rate-cutting cycle is the main focus. Other important releases of the day include the latest figures for Thai consumer sentiment, Malaysian industrial production, Australian trade and Japan's foreign exchange reserves.
Major markets condition in Asia
Japan's benchmark Nikkei index (.N225) reached new heights on Thursday, breaching the 35,000 mark for the first time since February 1990. This came on the heels of a banner year in 2023, with the Nikkei surging 28 percent, its strongest annual performance in a decade. It is now on course for its best week in three months.
The index surged as investors were waiting on whether the Bank of Japan (BoJ) would "normalize" its policy soon. The BOJ had already initiated a cautious shift away from its ultra-loose monetary policy by tweaking the "yield curve control" framework. However, speculation about the exit from the seven-year experiment with negative interest rates fueled anxieties about a rapid tightening.
The Japanese yen continued its slide on Thursday, dropping 0.32 percent overnight and last trading at 145.51 per dollar. However, the depreciation boosted export-oriented shares in the ongoing New Year rally.
Meanwhile, the MSCI index of Asia-Pacific shares outside Japan (.MIAPJ0000PUS) was on course to break its seven-day losing streak and climb 0.67 percent.
Japanese markets enjoyed a robust start. Toyota Motor Corp. (7203.T) surged over four percent, while Honda Motor Co. (7267.T) gained three percent. Apart from automakers, Sony Group Corp. (6758.T) climbed 3.5 percent and Hitachi (6645.T) jumped four percent.
In contrast, Chinese stocks hovered near multi-year lows as investor sentiment remained low. The blue-chip CSI 300 index (.CSI300) only inched up marginally in early trading, while Hong Kong's Hang Seng (.HSI) managed a modest 0.4 percent climb to 16,156.90. Shanghai Composite Index (.SSEC) fell by 0.4 percent to 2,867.72.
South Korean stocks were flat on Thursday, devoid of major catalysts and mirroring the widely anticipated decision by the Bank of Korea to maintain interest rates. The Korean won held its ground against the dollar, but benchmark bond yields displayed a slight downward trend.
Major Samsung Group companies experienced declines. Chipmaker Samsung Electronics (005930.KS) retreated 0.54 percent, while Samsung SDS (018260.KS) fell 1.63 percent. Samsung Life Insurance (032830.KS) and Samsung SDI (018260.KS) also faced downward pressure, slipping two percent and 1.69 percent, respectively.