Lower than expected US inflation rate makes Asian stocks see some gains on opening

11 May 2023 , 08:48 AM

After statistics revealed that consumer prices rose at a slower-than-expected rate in April, investors hailed signs of diminishing inflationary pressure in the U.S., sending Asian shares higher on opening, on Thursday.

Contrary to estimates of a 5% increase, the Consumer Price Index (CPI) released by the Labour Department increased 4.9% in April from a year earlier, giving rise to optimism that the Federal Reserve’s cycle of interest rate increases is nearing its conclusion. After increasing by 0.1% in March, the CPI increased by 0.4% in April.

The consumer and producer price rise figures for China and the ongoing full-year earnings season in Japan, which includes companies like Honda, Nissan, and SoftBank Group, are also of interest to the markets.

Data released on Thursday showed that factory gate deflation intensified in April while consumer price growth in China slowed down and missed forecasts, indicating that additional stimulus measures may be required to strengthen the shaky post-COVID economic recovery.

The Group of Seven (G7) financial leaders will aim to diversify supply chains away from China but also try to win Beijing’s help in addressing the world’s debt woes when their three days of meetings begin on Thursday in Japan.

The broadest MSCI index of Asia-Pacific shares outside of Japan was up 0.4% early in the Asian day.

Australian stocks fell by 0.19%, while the Nikkei stock index of Japan fell by 0.13%.

Early trading saw the blue-chip CSI300 index in China rise 0.15%, while the Hang Seng index in Hong Kong opened 0.41% higher.

After data showed U.S. consumer prices increased in April at a somewhat slower-than-expected rate, suggesting the Federal Reserve is succeeding in curbing excessive inflation, a barometer of global stock markets soared and bond yields declined on Wednesday.

The April inflation increase was less than anticipated, and Alphabet Inc.’s most recent AI rollout helped the Nasdaq conclude Wednesday at its best intraday level in more than eight months.

The S&P 500 rose 0.45%, the Dow Jones Industrial Average dipped 0.09%, and the Nasdaq Composite increased by 1.04%.

In contrast to a U.S. closing of 3.901%, the two-year Treasury yield, which normally swings in lockstep with rate forecasts, reached 3.9222%. The yield on benchmark 10-year Treasury notes increased to 3.4326% from its Wednesday closing U.S. price of 3.436%.

The dollar index, which measures the value of the dollar against a basket of other significant trading partners’ currencies, fell 0.01% to 101.4.

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