Stock markets across the world opened to a sea of green on Wednesday after the US stock market rallied to records on the back of lower inflation as compared with June figures, although overall, prices of goods have been rising steadily since the beginning of the year.
Tokyo's benchmark Nikkei 225 added 1.6 per cent to its record set a day earlier, rising to 43,407.46. Shares in Hong Kong, Singapore and Malaysia also gained more than 1per cent.
Hong Kong's Hang Seng surged 1.9 per cent to 25,439.91, while the Shanghai Composite index added 0.6 per cent to 3,686.34. South Korea's Kospi advanced 0.8 per cent to 3,215.43.
While the recent rally has also been because of relief over US-China tariff truce for the next 90 days, there is greater positive sentiment amongst investors about possible interest rates coming in by the Federal Reserve.
Also Read: Retail inflation drops to 8-year-low
The US’ central bank has been on a wait-and-watch mode to see how US President Donald Trump’s tariffs affect the economy before announcing any rate cuts. The moderation in the consumer price index in July could be a trigger for the Fed to announce further cuts, which Trump has been publically asking for.
“Asia woke up in full risk-on mode, riding the coattails of a US session that looked like someone hit the infinite bid' button after CPI didn't blow the inflation doors off,” said Stephen Innes of SPI Asset Management in a commentary.
In Japan, relief over the Trump administration's confirmation that its exports will face a flat 15 per cent US import duty has driven strong buying of computer chip-related companies and other exporters.
In Australia, the S&P/ASX 200 shed 0.5 per cent to 8,840.30.
Taiwan's Taiex was up 0.8 per cent, and the Sensex in India gained 0.4 per cent. In Bangkok, the SET climbed 0.9 per cent.
On Tuesday, the S&P 500 rose 1.1 per cent to top its all-time high set two weeks ago. It closed at 6,445.76.
The Dow Jones Industrial Average climbed 1.1 per cent to 44,458.61, while the Nasdaq composite jumped 1.4 per cent to set its record of 21,681.90.
Meanwhile, Intel’s stock rose 5.6 per cent after Trump did a volte-face on the chip firm’s CEO and said he has an “amazing story”, less than a week after he had demanded Lip-Bu Tan’s resignation.
Another stock that did well was the Circle Internet Group, which rose 1.3 per cent despite reporting a loss for the latest quarter. The company is behind the popular USDC cryptocurrency that tracks the US dollar.
The company said its total revenue income grew 53 per cent in its first quarter as a publically-traded company, topping forecasts.
The US inflation report released on Tuesday spelt a 2.7 per cent increase in prices of groceries, gasoline, and other costs of living in July than a year earlier. That’s less than the 2.8 per cent recorded in June this year.
The Fed is expected to get one more report on inflation and another on the US job market before its next meeting that ends September 17, especially since the recent job report was much weaker than expected.
Lower interest rates, as asked for by Trump, would certainly boost investment prices and give momentum to the economy, making it easier for US consumers to buy houses and cars.
Early Wednesday, US benchmark crude oil edged 4 cents higher to USD 63.21 per barrel. Brent crude, the international standard, was up 8 cents at USD 66.20 per barrel.
The US dollar rose to 147.94 Japanese yen from 147.84 yen. The euro climbed to USD 1.1686 from USD 1.1677.
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