Asia stocks rallied on Tuesday as investors displayed optimism ahead of the release of U.S. Consumer Price Index (CPI) data. The Nikkei, Japan's benchmark index, breached the 35,000 mark for the first time in over three decades, signaling a strong start to the day for the region.
Investors remained focused on the upcoming CPI release, as it is expected to provide further insights into inflationary pressures in the United States. Rising inflation has been a key concern for global markets, as it could prompt central banks to tighten monetary policies and potentially impact economic recovery.
The Nikkei led the surge in Asian markets, gaining 0.9% and surpassing the 35,000 level for the first time since 1990. The positive sentiment was driven by a weaker yen and strong corporate earnings. Export-oriented companies benefited from a weaker yen, as it makes their products more competitive in global markets, while upbeat earnings reports from major companies buoyed market sentiment.
Other major Asian markets also ended in positive territory. South Korea's Kospi index rose 0.8%, supported by gains in heavyweight tech stocks such as Samsung Electronics and SK Hynix. In Hong Kong, the Hang Seng Index advanced 0.6%, led by China Evergrande Group's shares that surged more than 8% after the company announced asset sales. Meanwhile, Chinese equities showed modest gains, with the Shanghai Composite and the CSI 300 both up around 0.3%.
Investors are closely monitoring the CPI data for hints of further inflationary pressures. Inflation concerns have been driven by factors such as supply chain disruptions, rising commodity prices, and pent-up demand as economies gradually reopen. The U.S. Federal Reserve has emphasized that temporary inflation spikes are expected, but a sustained increase could necessitate a policy response.
Market participants are keenly awaiting the CPI release later in the day to assess whether the U.S. economy is experiencing transitory inflation or if there are indications of a longer-lasting trend. The outcome could impact expectations for the Fed's monetary policy trajectory and, consequently, global financial markets.
The positive market sentiment in Asia mirrored gains in Wall Street overnight, where all three major U.S. indices reached record highs. Strong corporate earnings, along with decreasing concerns about the economic impact of the Delta variant, have contributed to the market's resilience.
With Asia markets showing strength and global stocks continuing their strong performance, market participants are cautiously optimistic about the outlook. However, any unexpected surprises in the CPI data could introduce volatility back into the markets. As investors await the release, they will be analyzing the figures closely to make informed investment decisions.
