Global Market Today: Asian stocks advance, crude oil holds decline

Asian stocks gained as further evidence of moderating US inflation and a pullback in oil prices reinforced bets that the Federal Reserve will refrain from raising interest rates next month.

MSCI’s Asia Pacific equities gauge advanced 0.4%, with South Korea’s Kospi Index jumping almost 3%. Earlier, the S&P 500 rose 0.7% Thursday to a record, while the Nasdaq 100 climbed over 1% to its highest level since late June as increased hyperscaler spending buoyed tech shares.

Read more: Top FPIs ride out storm, outrun Nifty & Sensex in Q1

Treasuries rose Thursday as US wholesale inflation cooled in July, sending yields across maturities lower. The yield on the rate-sensitive two-year bond fell six basis points to 4.14%. Money markets now price in less than a 40% chance of a Fed rate increase in September.

Meanwhile, Brent was little changed around $87.20 a barrel early Friday after dropping more than 2% in the previous session, snapping a six-day rally.

Back-to-back benign inflation prints, following last week’s softer-than-expected jobs report and a pullback in oil prices, are easing pressure on the Fed to tighten policy at its meeting next month. While the lack of a deal in the Middle East remains a concern, equity traders are also focusing on a revival in the artificial intelligence trade after a selloff in semiconductor stocks in July.

“The next round of data that we get in September and the lead up to the meeting will be pretty critical,” said BofA Securities economist Stephen Juneau. At the same time, “the market obviously has started to really discount hikes more and more given that the data in recent months has been more dovish.”

US wholesale inflation decelerated by more than forecast in July. The producer price index rose 4.7% from a year earlier, down from a 5.5% annual increase in June, and was unchanged from the previous month.

Even as Treasuries rallied Thursday, the US sold 30-year bonds at the highest yield in a quarter century, underscoring the premium investors are demanding to finance the nation’s deficits.

Long-term yields have surged above 5% this year as higher energy prices fueled concern that inflation would remain elevated and force the Fed to keep rates higher for longer. Those pressures have been compounded by heavy Treasury issuance after years of fiscal deficits and a wave of corporate borrowing to finance the artificial-intelligence boom.

Meanwhile, Fed officials remain divided over the path for rates.

Richmond Fed President Tom Barkin argued for holding steady as inflation eases, while Cleveland Fed President Beth Hammack reiterated her preference for a hike.

Thursday’s benign inflation reading, coupled with last week’s softer jobs report, may give Fed Chair Kevin Warsh enough room to keep rates unchanged, according to Arun Sundaram at CFRA.

“But the Fed’s decision is far from settled,” he said. “Investors still have several potential plot twists to digest.”

Elsewhere, the Trump administration is applying a 100% tariff on imports of unmanned aircraft systems and their components in a bid to cut the US’s reliance on foreign supplies of drones.

In Asia, the yen remained within striking distance of a key level against the dollar, even after Prime Minister Sanae Takaichi’s government was said to support an interest-rate increase. The Japanese currency was little changed early Friday, trading near 159.50 per dollar.

The Bank of Japan is likely to raise rates in either September or October, according to people familiar with the matter. Concerns at the central bank that yen weakness will fuel inflation are converging with the government’s desire to reinforce the impact of recent US-Japan currency intervention, strengthening the case for a near-term hike, the people said.