Global Markets: Asian shares gain after US inflation data calm Wall Street; Nikkei up as Japan’s GDP beats estimates

Asian markets traded higher on Thursday after Japan’s GDP growth beat expectations, and following overnight gains on Wall Street.

Japan’s Nikkei 225 gained 0.2%, while the Topix rose 0.5%. Hong Kong Hang Seng index futures indicated a lower opening. South Korea’s markets are shut for a holiday. In Australia, the S&P/ASX 200 added 0.3%.

While Japan released its second-quarter gross domestic numbers, investors will also watch out for other key economic data in the region, including China’s retail sales, industrial output and urban unemployment data for July.

Meanwhile, Indian stock markets are also closed for observance of the Independence Day 2024.

Japan’s GDP

Japan’s economy expanded at a faster-than-expected annualised rate of 3.1% in the April-June quarter, rebounding from the previous quarter led by pick up in consumption.

On a quarter-on-quarter basis, Japan’s gross domestic product (GDP) climbed 0.8% compared to forecasts of a 0.5% increase by economists polled by Reuters. This was also a reversal from the revised 0.6% fall seen in the first quarter.

US Stocks

Overnight gains on Wall Street after US inflation data met market expectations, also fuelled upside in Asian markets. The S&P 500 and the Nasdaq Composite extended their winning streak for the fifth straight session on Wednesday.

The Dow Jones Industrial Average gained 242.75 points or 0.61% to 40,008.39, while the S&P 500 rose 0.38%, or 20.78 points, to 5,455.21. The Nasdaq Composite ended at 17,192.60, up 0.03% or 4.99 points.

Alphabet share price declined 2.3%, while Tesla stock price dropped 3.1% and Meta Platforms shares fell 0.3%. Microsoft share price fell 0.7% and Nvidia stock price declined 1.7%.

US Inflation

US consumer prices rose moderately in July and the annual increase in inflation slowed to below 3% for the first time in nearly 3-1/2 years, reassuring investors the Federal Reserve would start cutting US interest rates next month.

The consumer price index rebounded 0.2% last month after falling 0.1% in June. In the 12 months through July, the CPI increased 2.9%. That was the first sub-3% reading and smallest gain since March 2021, Reuters reported. Consumer prices advanced 3.0% on a year-on-year basis in June.

US Fed Rate Cut Bets

Money markets now see a 55% chance of a 25-basis point (bps) rate cut at the Fed’s September 17-18 meeting, as per the CME FedWatch Tool, Reuters reported. Before the US inflation data, traders were nearly evenly split between a 25-bps and 50-bps cut.

Oil Prices

Crude oil prices rose on Thursday, recovering some of the previous day’s loss.

Brent crude futures rose 0.2% to $79.93 a barrel, while US West Texas Intermediate crude gained 0.3% to $77.21 per barrel. Both benchmarks fell more than 1% on Wednesday.

Dollar

The dollar eased on Thursday and the euro perched near an eight-month high after US inflation slowed down.

The dollar index, which measures the US unit versus six rivals, was last at 102.6, not far from the eight-month low of 102.15 it touched last week, Reuters reported. The index is on course for its fourth straight week in the red, a run it last had in March-April 2023.

The yen was steady at 147.26 per dollar after the release of Japan’s Q2 GDP data.

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(With inputs from Reuters)