By Tom Westbrook
SINGAPORE (Reuters) – Stocks rose on Thursday as markets from Tokyo to New York hit record highs, as traders awaited U.S. data expected to show inflation is falling and pave the way for an interest rate cut in September.
Bonds and the dollar remained steady, keeping the yen on the weak side at 161 yen per dollar and near multi-decade lows.
Gains in heavy technology stocks pushed the S&P 500 up 1% overnight to a record closing high for the sixth straight time, while in Asia, Japan’s Nikkei average rose 1% to an all-time high of 42,426.
MSCI’s broadest index of Asia-Pacific shares outside Japan also rose 1% to a two-year high. Taiwanese shares hit a record high and Australia’s ASX 200 was one step away from an all-time high.
“The main driver is really the prospect of a rate cut,” said Shane Oliver, chief economist and head of investment strategy at AMP in Sydney. “If we get a good inflation reading, that would be one of Powell’s targets.”
Federal Reserve Chairman Jerome Powell told lawmakers in the US Congress that “more good data” would strengthen the case for the US central bank to cut interest rates. Futures prices indicate about a 75% chance of a rate cut in September.
Economists expect the annual rate of consumer price inflation in the United States to slow to 3.1% in June, compared to 3.3% in May.
The Bank of Korea kept interest rates unchanged, with Governor Ri Chang-yong telling reporters that it was time to prepare for a shift to lower interest rates.
The Reserve Bank of New Zealand’s shift in tone on Wednesday led to a sharp repricing of interest rate cut expectations, with the benchmark two-year swap rate falling 18 basis points and the currency sliding.
Malaysia is expected to keep interest rates steady later in the day, while the U.S. earnings season also gets underway with results from Delta Air Lines and consumer-focused PepsiCo, followed by bank results on Friday.
China is backward
Chinese stocks were in line with the market momentum on Thursday, but the pace of disappointing data and talk of tariffs in key export markets made it difficult to sustain gains. China’s GDP data is due out on Monday.
Hong Kong’s Hang Seng Index rose 1%, while in the mainland, the blue-chip CSI300 index rose 0.4%, though it remained near a four-and-a-half-month low hit on Tuesday. (.HK)(.SS)
The Chinese yuan was steady at 7.2738 against the dollar, just above its lowest in nearly eight months hit on Wednesday.
Elsewhere, moves were modest ahead of the US CPI.
The euro rose to $1.0835. Sterling hit a one-month high of $1.2854 after the Bank of England’s chief economist appeared more vague overnight about the timing of an interest rate cut than many traders had expected.
The yen held steady at 161.58 yen against the dollar. Data showed Japan’s core machinery orders unexpectedly fell for a second straight month, defying expectations for higher interest rates.
The New Zealand dollar found support at its 200-day moving average and traded at $0.6095. The Australian dollar rose 0.2% to a six-month high of $0.6763. (AUD/)
Treasuries were steady overnight and in Asia, with the yield on the 2-year US Treasury note steady at 4.62% and the yield on the benchmark 10-year Treasury note steady at 4.29%.
In commodities trading, oil prices rose slightly on signs of strong gasoline demand in the United States. Brent crude futures rose 35 cents, or 0.4 percent, to $85.43 a barrel. U.S. crude rose 36 cents, or 0.5 percent, to $82.47 a barrel.
Favorable weather in the United States has pressured wheat futures to near 2-1/2-month lows. (GRA/)
Gold rose 0.2% to $2,373 an ounce. Bitcoin settled at around $58,900 after a sell-off last week.
(Reporting by Tom Westbrook; Editing by Sherry Jacob Phillips)