Asian Stocks Poised to Gain as US Inflation Eases Rate Hike Concerns

Asian stocks are poised to rise following a benign US inflation report that has eased concerns about imminent interest rate hikes by the Federal Reserve. The subdued US consumer price index (CPI) reading, which rose in line with forecasts in July, and a cooler-than-expected US jobs report may keep hawkish Fed officials at bay in September, according to Gary Schlossberg of Wells Fargo Investment Institute.

The US CPI reading, excluding volatile food and energy categories, increased 0.2% in July from the previous month, while on an annual basis it advanced 2.5%, matching its slowest pace since March 2021. This has led to a decrease in expectations of US policy tightening, with money markets assigning less than a 50% chance of a September rate increase.

US Treasury yields remain elevated due to above-target inflation and widening budget deficits. The 30-year bond sale is expected to price at the highest financing rate in 25 years. In other market developments, gold gave up some of its advances from Wednesday to trade around $4,400 an ounce, while the US dollar was slightly weaker against most of its Group-of-10 peers.

The yen edged closer to the key level of 160 per US dollar on Wednesday, keeping investors cautious and watching for potential intervention by Japanese authorities. Nathan Thooft at Manulife Investment Management noted that levels approaching or exceeding the recent intervention zone are likely to keep traders wary of further action.