Asian stocks rose 0.5% on Friday, taking their weekly advance to 2.7% as moderating US inflation reinforced bets that the Federal Reserve will refrain from raising interest rates next month. According to The Hindu BusinessLine, MSCI's Asia-Pacific equities gauge climbed 0.5%, with the region extending gains for a fourth consecutive week. South Korea's Kospi Index led regional gains, with Samsung Electronics Co. and SK Hynix Inc. taking their gains for the week to more than 15%. The positive momentum was driven by U.S. inflation data coming in as expected, which dampened expectations of further near-term Federal Reserve rate hikes. Advances in Asia came as investors redoubled their bets on the AI trade after last month's sell-off, sending MSCI's All Country World Index to a record high this week. As per Investing.com India, Japan and South Korea are set to open firmer, with Asia being handed the baton with momentum already running in the right direction, not needing to repair damage done in New York.
The dollar experienced a decline following disappointing US economic indicators, leading to less anticipation for interest rate hikes. According to The Economic Times, the dollar remained under pressure after weak US economic data reduced bets for the Federal Reserve to raise interest rates next month. A Bloomberg gauge of the currency's strength slipped 0.1%, hovering around levels last seen in May, with the dollar weaker against all of its Group-of-10 peers after Friday data showed US retail sales fell in July by the most in more than a year as consumers pulled back on purchases. Swaps traders see around a one-in-four chance that the Fed will raise interest rates next month, that's down from a 50% chance only a week ago. Treasuries rose across the curve, with the yield on the rate-sensitive 2-year falling two basis points to 4.15%, while the benchmark 10-year eased one basis point to 4.68%.
Japanese markets demonstrated robust gains with producer prices rising 7.2% in July, easing slightly from 7.3% in June and coming below the 7.4% forecast. According to Business Standard, technology and artificial intelligence-related stocks led the gains, with Kioxia Holdings rising 3.9%, Taiyo Yuden gaining 6.5%, Advantest advancing 4%, Ibiden Co climbing 5.3% and Murata Manufacturing surging 10.3%. Banking stocks also advanced significantly, with Mitsubishi UFJ gaining 2.9%, Sumitomo Mitsui rising 1.6% and Mizuho Financial climbing 3.2%. The softer-than-expected inflation data provided relief to markets, with global risk appetite improving as investors anticipated the Fed may keep interest rates unchanged at its September meeting. Japan's Topix rose 0.7% on Friday, while the yen traded stronger as Japan's economic growth unexpectedly slowed in the three months through June as capital spending continued to slump.
US stock markets closed at fresh record highs on Thursday after the S&P 500 briefly crossed the 7,800 mark for the first time intraday before closing 0.65% higher at a record, while the Nasdaq Composite gained 0.81%. As reported by The Hindu BusinessLine, the S&P 500 Index closed at an all-time high Thursday, while the Nasdaq 100 climbed more than 1% to its highest level since late June. July's Producer Price Index (PPI) was unchanged from the previous month, compared with expectations for a 0.2% increase, while the annual rate slowed to 4.7% from 5.5% in June, both readings coming in below economists' expectations. The moderation was driven largely by a 3.1% decline in energy prices, including a 5.7% drop in gasoline prices, and a 0.9% fall in food prices. However, core PPI, excluding food, energy, and trade services, accelerated to 0.4% in July from 0.1% in June, driven in part by a 6.5% jump in portfolio management fees. According to Investing.com India, the S&P 500 added 0.7% to another record Thursday, while the Nasdaq 100 climbed 1.15% to its highest since late June as renewed enthusiasm around hyperscaler spending put some voltage back into technology. Sector performance saw communication services (XLC) leading the pack, followed closely by real estate (XLRE), consumer staples (XLP), and technology (XLK).
Asian stocks were little changed, with South Korea out for a holiday, as investors watched for efforts to reopen the Strait of Hormuz, which may weigh on oil after it jumped almost 6% last week. According to The Economic Times, oil erased earlier gains as traders looked for the next catalyst to set direction, with renewed Israeli attacks on Lebanon and the prospect of fresh US sanctions on Iran adding to geopolitical uncertainty. Brent crude traded around $88.55 a barrel, having earlier climbed to almost $89. "The most significant headwind for the market currently remains geopolitical uncertainty, which continues to weigh on market sentiment here and there – although the relative lack of military activity in the Middle East has lowered volatility at the margins," said Kyle Rodda, a senior analyst at Capital.com. In other corners of the market, futures contracts for the S&P 500 and the Nasdaq 100 Index advanced, after the underlying gauges slipped Friday on signs of a slowdown in US consumer spending. Gold inched up 0.4% to about $4,390 an ounce, while a slew of China data, including retail sales and industrial production, will be in focus Monday with economists expecting consumer spending to have picked up slightly in July.
