Latest News

Asia stocks gain, dollar drifts as inflation tests wait for

Asian stocks rose on Friday and were poised for the 4th month of gains, while the dollar wandered lower, keeping the yen constant as financiers await inflation readings from Europe and the U.S. that will likely determine the path of interest rates globally.

A downward revision to customer spending meant the U.S. economy grew more slowly than expected in the first quarter, information revealed on Thursday, weighing on Treasury yields and the dollar.

The financial information also stired expectations that the Federal Reserve has scope to cut rates this year, with market prices putting a September cut at a coin toss, CME FedWatch tool showed. For the year, traders are pricing in 35 basis points of reducing.

MSCI's broadest index of Asia-Pacific shares outside Japan rose 0.55%, pressing far from the three-week low hit on Thursday. The index is set for a 1.4% decrease for the week but is up 2.7% in May, rising for the 4th straight month.

Japan's Nikkei was up 0.20% and is flat for the month. China stocks likewise increased, with the blue-chip index up 0.23% while Hong Kong's Hang Seng index spiking 1.3% higher.

The upturn in China's markets came even as the nation's. manufacturing activity unexpectedly fell in May, an authorities. factory survey revealed on Friday. The soft outcome kept alive. calls for fresh stimulus as a drawn-out residential or commercial property crisis. continues to weigh on services, consumers and financiers.

Monetary markets have actually been biding their time for the main. data occasion of the week - Friday's April report on U.S. core. personal usage expenses (PCE) price index, which is. the Fed's preferred inflation gauge.

Tony Sycamore, market analyst at IG, stated the market is. taking a more careful approach to the European and U.S. PCE. inflation data after upside surprises in Australia and German. inflation reports earlier this week.

Federal Reserve policymakers continue to anticipate inflation to. fall this year even as the labour market remains strong, leaving. them in no hurry to cut the policy rate from the 5.25% -5.5%. range they have actually kept it in because last July.

Elsewhere, traders are also warily examining their. shoulders for any tips of intervention from the Tokyo. authorities as the Japanese yen flirts with levels. that resulted in presumed bouts of intervention late in April and. early this month.

The yen was last at 156.74 per dollar, having actually touched. four-week lows of 157.715 on Wednesday. The currency compromised to. its least expensive in 34 years at 160.245 on April 29, sparking at least. 2 suspected rounds of interventions.

The Japanese authorities have actually been relatively restrained in. their current verbal warnings, potentially waiting for weaker U.S. financial information and a shift in Fed policy to support the yen,. according to Charu Chanana, head of currency strategy at Saxo.

However with the Fed looking likely to cut rates just towards. completion of the year, the frail yen has been captured in the. crosshairs of the large gap in between U.S. and Japan yields, with. traders using the yen to money their investments in greater. yielding currencies.

Data on Friday showed core consumer prices in Japan's. capital rose 1.9% in May on increasing electrical power bills but cost. growth excluding the impact of fuel alleviated, heightening. unpredictability on the timing of the central bank's next interest. rate hike.

Even if the BOJ raises rates in June or July, the increase. is expected to be minimal and unlikely to substantially close. the gap with US rate of interest, Chanana said, noting that. movements in dollar/yen towards the 155 level could attract more. carry trade interest.

The dollar index, which determines the U.S. currency. against 6 rivals, was at 104.77, on course for 1.5% decline in. May, snapping a four-month winning streak.

The euro last brought $1.0828 ahead of inflation. report from euro zone that is set to influence the European. Central Bank's policy path. The central bank is all but specific. to cut rates in June but what follows that remains. unpredictable.

Markets are pricing 60 basis points of ECB cuts this year.

In commodities, oil rates eased after a surprise build in. U.S. gasoline stocks weighed on the market. Brent. futures was down 0.31% at $81.61 a barrel, while U.S. West Texas. Intermediate (WTI) crude CLc1 was down 0.36% at $77.63.

Gold costs rose 0.12% to $2,345.93, on course for over 2%. gain in May.

(source: Reuters)