Asian shares track Wall Street gains on cooling inflation

BANGKOK

After benchmarks closed at Wall Street’s three-month highs, shares rose in Asia Thursday as investors rejoiced that inflation had fallen more than anticipated in July.

Hong Kong, Shanghai and Seoul saw increases of over 1%. Tokyo was closed due to holiday. U.S. futures rose while oil prices fell.

The government said Wednesday’s consumer inflation report showed that July saw a 8.5% increase in consumer prices compared to a year ago. But that was down from June’s four-decade high of 9.1%.

The S&P 500 surged 2.1% on expectations that slower inflation will mean the Federal Reserve may moderate its interest rates hikes. Technology stocks, cryptocurrencies and other investments that have been among the year’s biggest losers due to the Fed’s aggressive rate hikes led the way.

Hong Kong’s Hang Seng index increased 1.9%, to 19,982.20. The Shanghai Composite index increased 1.2%, at 3,268.02. The Kospi in Seoul rose 1.3%, to 2,513.22, while Taiwan’s Taiex was at 1.5%.

The SET gained 0.4% in Thailand after the central bank increased its benchmark interest rate by 0.25 percent to 0.75% a few days earlier. The pandemic has ravaged the country’s all-important tourism industry, and it has taken a severe toll on the economy.

On Wall Street, the S&P 500 rose 87.77 points to 4,210.24, hitting its highest levels since early May. It has risen to almost 15% from its June low.

The Nasdaq Composite, which includes many high-growth, expensive-looking stocks, rose 2.9% to 12,854.80. It is up by more than 20% compared to June.

The Dow Jones Industrial Average rose 1.6% and reached 33,309.51.

Today’s biggest winners included technology stocks, cryptocurrency and other investments that were among the most difficult-hit this year. Bitcoin rose 2.2% to just over US$24,000.

Inflation was tempered by lower gasoline and oil prices in July. But excluding that and volatile food prices, so-called “core inflation” held steady last month, at 5.9%, instead of accelerating as economists had forecast.

These data encouraged traders to reduce their bets on how much the Fed would raise interest rates at its next meeting. The interest rates determine the direction of financial market prices. Higher rates can cause prices to drop for all commodities and stocks, as well as crypto.

The Fed will release other reports this week that will reveal how inflation is faring at the wholesale level. They will also report on whether households are still trying to lower their expectations of future inflation.

Prices for bonds soared immediately after the inflation report’s release, pulling their yields lower. The yield on the Treasury’s two-year Treasury fell to 3.19%, from 3.27% late Tuesday.

Initial decline in the 10-year yield was noticeable, but it stabilized in trading later. It rose to 2.79%, from 2.78% on Tuesday. It still falls below the yield of two years, but many investors view this gap as a sign of a possible recession.

As inflation reaches its highest level in 40 years, households and businesses around the globe are facing serious recession fears. Wall Street closely monitors the Fed’s ability to slow down the economy and cool inflation without entering into recession.

Before its Sept. 21 announcement on interest rates on September 21, the Federal Reserve will receive a few more highly-anticipated reports. They could change its stance. These include data on the economy’s hiring trends, due Sept. 2, as well as the next update on consumer inflation on Sept. 13.

U.S. benchmark crude oils lost 15 cents per barrel to $91.78/barrel in electronic trading on New York Mercantile Exchange. On Wednesday, it gained $1.43 to $91.93.

Brent crude oil, the basis of international pricing, dropped 10 cents to $97.30

Late Wednesday, the U.S. dollar rose from 132.93 to 133.20 yen to 133.20 yen. From $1.0300, the euro fell to $1.0288.

___

Stan Choe, Damian J. Troise were AP Business Writers.