Asian stocks rose on Thursday, following Wall Street’s strong performance as cooling U.S. core inflation raised hopes for potential Federal Reserve rate cuts later in the year. The Japanese yen surged on expectations of a rate hike by the Bank of Japan (BOJ), while the South Korean won also strengthened after the central bank held rates steady.
The major stock indices in Australia, Hong Kong, and China all recorded gains, pushing the broader Asian equities index higher for the third consecutive day. The S&P 500 gained 1.8% on Wednesday, its best day since November, helping to reverse its earlier losses for 2025.
The yen appreciated by up to 0.8% on reports that BOJ officials are considering a rate increase during their upcoming meeting at the end of January, unless significant market disruptions occur following the inauguration of U.S. President-elect Donald Trump. The South Korean won also gained strength after the central bank left interest rates unchanged, defying expectations for a rate cut. Meanwhile, U.S. Treasury yields and the U.S. Dollar Index remained stable.
Swap traders are pricing in a rate cut by July after the U.S. inflation report, bringing back earlier expectations that were dampened by stronger-than-expected employment data in December. However, investor sentiment will be tested in the coming days as the Fed and BOJ announce their policy decisions, and President-elect Trump takes office.
UBS Wealth Management strategist Suresh Tantia highlighted that “growth is holding up,” with a particularly strong outlook for tech companies in Asia, especially those in the AI sector.
In Japan, the yen’s rally was fueled by speculation that the BOJ may raise rates from 0.25% at its meeting later this month. However, Saxo Markets’ Charu Chanana warned that the yen’s gains might be short-lived if the BOJ surprises the market with dovish commentary after a potential rate hike.
Meanwhile, commodities continued their upward trajectory, with oil extending its rally on concerns about global supply risks, while U.S. crude inventories saw their longest decline since 2021. Gold prices remained largely unchanged.
The Canadian dollar stayed stable, despite news that Canada had prepared a list of U.S. goods to target with tariffs if Trump proceeds with tariffs on Canadian exports.
Key upcoming events include the European Central Bank’s release of its December policy meeting minutes, U.S. economic data on jobless claims and retail sales, and China’s GDP and economic indicators on Friday.
Key Market Movements:
Stocks:
- Australia’s S&P/ASX 200: +1.3%
- Hong Kong’s Hang Seng: +1.6%
- Shanghai Composite: +0.8%
- Japan’s Topix: unchanged
- Euro Stoxx 50 futures: -0.4%
Currencies:
- USD/JPY: +0.6% to 155.57
- EUR/USD: unchanged at $1.0291
- Offshore yuan: unchanged at 7.3448
Commodities:
- WTI crude: +0.2% to $80.19/barrel
- Spot gold: unchanged
Bonds:
- U.S. 10-year Treasury yield: unchanged at 4.66%
- Australia’s 10-year yield: -10 basis points to 4.53%
Inflation Data Insights: U.S. core consumer price index (CPI), which excludes food and energy, rose by 0.2% in December, marking its first deceleration in six months. Year-over-year, it increased by 3.2%, still above the Federal Reserve’s 2% target. Federal Reserve officials expressed confidence that inflation is on the decline, but emphasized that it will take time to reach the target.
Related Topics:
Sensex and Nifty Face Volatility: How Should Investors Respond?
Nvidia AI Chip Partnership Adds Fuel to MediaTek’s Share Rally
