Asia: Markets rally with Wall Street after US inflation eases further

A SURGE in tech firms on Thursday helped Asian markets track a Wall Street rally after data showed US inflation at a more than three-year low, reinforcing expectations the Federal Reserve will cut interest rates next week.

The much-anticipated consumer price index allowed investors to breathe a sigh of relief after a tough couple of weeks that have been filled with worries about the world’s top economy, as a weak run of jobs figures stoked recession fears.

While a report on wholesale prices is due later in the day, the main focus is now on next week’s Fed policy decision and its post-meeting statement on the outlook for rates.

Bets are now surging on a 25-basis-point reduction, with talk of a 50-point shift muted by figures showing that core inflation had seen an unexpected uptick.

US traders welcomed the data and pushed all three main indexes higher, with the Nasdaq up more than two per cent and the S&P 500 more than one per cent.

The rally was fuelled by a big jump in the tech sector, with chip titan Nvidia rocketing more than eight per cent, advanced Micro Devices almost five per cent higher and Microsoft piling on 2.2 per cent.

And the positive mood flowed through to Asia, where Tokyo led gainers and jumped more than three per cent after seven days of losses, while Hong Kong, Shanghai, Sydney, Seoul, Singapore, Taipei, Manila and Jakarta also enjoyed strong buying sentiment.

“A first rate cut in September should now trigger a new cycle of interest rate cuts,” said Philipp Bartschi at Bank J. Safra Sarasin.

The advances were fanned by a rally among regional tech giants, particularly semiconductor manufacturers, who have wobbled in recent weeks on worries about the economy and high valuations following a scorching run-up in 2024.

In Tokyo, Advantest jumped seven per cent and Hitachi more than four per cent, TSMC was up 4.7 per cent in Taipei and Seoul-traded SK hynix added six per cent.

The spike in Japan’s Nikkei was helped by a drop in the yen sparked by expectations US rates will only likely be cut by the smaller amount.

The yen had hit 140.71 per dollar at one point on Wednesday – its strongest in nine months – after a top Bank of Japan official said it would press on with its monetary tightening if the economy and inflation act as expected.

The unit was also helped by improving odds on a Kamala Harris US presidency after she came out on top in her debate with Donald Trump, whose policies many observers see as being likely to strengthen the dollar.

Oil rose again, extending the previous day’s gains of more than two per cent that analysts said was helped by offshore platform production suspensions in the Gulf of Mexico caused by Hurricane Francine. AFP