SINGAPORE: Asian stocks were headed for a fifth straight month of gains on Friday, bolstered by the growing view that cooling inflation in the United States would allow the Federal Reserve to ease rates later this year.
Friday is packed with risk events for markets after a relatively subdued rest of the week, with US Democratic President Joe Biden and his Republican rival Donald Trump set to take the stage at 0100 GMT for their first debate of the year ahead of November’s US presidential elections.
Chinese markets, in particular, will be looking out for comments about the trade relationship with Beijing, which has further soured in recent years.
On the data front, figures for May’s US core personal consumption expenditures (PCE) price index – the Fed’s preferred measure of inflation – are due later on Friday, and could offer further clarity on the US rate outlook.
“If tonight’s core PCE inflation were to come in much hotter than the 2.6% expected and after upside surprises to Canadian and Australian inflation data this week, it would inflame concerns that the decline in global inflation has bottomed out and may have reaccelerated in some countries,” said Tony Sycamore, a market analyst at IG.
MSCI’s broadest index of Asia-Pacific shares outside Japan rose 0.06% early in the Asian session, and was on track to gain some 3.2% for the month, its best performance since February.
Asian shares shaky as investors wary before US inflation data
Growing expectations of an imminent Fed easing cycle and momentum from the artificial intelligence boom have sparked a risk rally across stock markets and catapulted Wall Street to record highs, in turn lifting Asian shares.
Traders are now pricing in a 64% chance of a first Fed cut in September, up from 50% a month ago, according to the CME FedWatch tool. Japan’s Nikkei jumped 0.78%, reversing some of its losses from the previous session.
It was eyeing a monthly gain of 3%, helped by a weak yen and a rally in technology stocks.
S&P 500 futures and Nasdaq futures both ticked higher, rising 0.18% and 0.3%, respectively. In currencies, the yen continued to languish near a 38-year low on the weaker side of 160 per dollar, leaving markets on alert for any intervention from Japanese authorities to prop up the currency.
The yen was last marginally higher at 160.68 per dollar , but was set to lose more than 2% for the month, as it continues to be hammered by stark interest rate differentials between the US and Japan.
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