Asian shares mostly rose Thursday, as investors turned their attention to what the Bank of Japan might decide on monetary policy later this week.
The Bank of Japan is not expected to raise its benchmark rate when it wraps up its meeting on Friday, but the economy is under pressure from the dollar's prolonged surge against the Japanese yen.
“Given the recent ‘hawkish hold’ outcome from the Fed, if the BOJ were to stick to its usual accommodative tone in terms of policy settings, that may pave the way for the upward trend in the U.S. dollar to the Japanese yen to continue,” Yeap Jun Rong, a market analyst at IG, said in a commentary.
In currency trading, the U.S. dollar edged down to 157.14 Japanese yen from 156.71 yen. The euro cost $1.0805, down from $1.0812.
As expected, the Federal Reserve kept its main interest rate steady on Wednesday following its latest policy meeting. And Treasury yields dropped after a report on inflation showed U.S. consumers paid prices that were 3.3% higher for food, insurance and everything else last month from a year earlier. Economists had been expecting to see the inflation rate stuck at 3.4%.
Japan's benchmark Nikkei 225 dipped 0.2% in afternoon trading to 38,807.36. Australia's S&P/ASX 200 surged 0.4% to 7,749.30. South Korea's Kospi jumped 1.2% to 2,760.31. Hong Kong's Hang Seng gained 0.5% to 18,017.83, while the Shanghai Composite declined 0.2% to 3,030.12.
Wednesday on Wall Street, the S&P 500 added 0.9% to its all-time high set a day earlier, closing at 5,421.03. The Nasdaq composite also built on its own record and jumped 1.5% to 17,608.44. The Dow Jones Industrial Average lagged the market with a dip of 0.1% to 38,712.21.
Smaller companies that need to borrow to grow and can therefore feel the pinch of higher interest rates more than larger rivals led the market. The smaller stocks in the Russell 2000 index jumped 1.6%.
For Wall Street, a slowdown in inflation not only helps U.S. households struggling to keep up with fast-rising prices, it also opens the door for the Federal Reserve to cut its main interest rate. Such a move would ease pressure on the economy and give a boost to investment prices.
Everything from bitcoin to gold to copper rallied after the inflation data raised expectations for coming cuts to interest rates. A measure of nervousness among investors in U.S. stocks also eased.
Policymakers welcomed the latest update on inflation, but “we’ll need to see more good data to bolster our confidence,” Fed Chair Jerome Powell said. He repeated the Fed’s mantra that it needs an accumulation of data showing inflation is sustainably heading toward its 2% target before it lowers the federal funds rate, which is at the highest level in more than two decades.
“We’ll have to see where the data lights the way,” he said, reiterating the Fed’s commitment to moving based on where incoming reports steer it.
Lower interest rates could mean easier mortgage rates, helping to inject energy into the housing market. Homebuilder D.R. Horton climbed 3%. Builders FirstSource, which sells vinyl windows, custom millwork and other building materials, jumped 5.3%.
Oracle helped lead Wall Street higher with a leap of 13.3% even though it reported weaker profit for the latest quarter than analysts expected. Financial analysts pointed to strong bookings, including contracts related to artificial-intelligence training.
A furor around AI has helped send stocks to records despite worries about high interest rates and the slowdown in the economy that they induce. Nvidia again was the strongest force pushing the S&P 500 higher, with a gain of 3.5%. The chip company has become the poster child of the AI rush, and its total market value has topped $3 trillion.
Apple was nearly as strong a force pushing up on the S&P 500 as Nvidia after rising 2.9%. Its stock has been jumping the last two days after getting a cool initial reception to the announcement of several AI-related offerings coming to its operating systems.
In energy trading, benchmark U.S. crude lost 22 cents to $78.28 a barrel. Brent crude, the international standard, fell 25 cents to $82.35 a barrel.
