Asian stocks: Asian stocks set to advance as US inflation cools

Contracts for Japanese, Australian and Hong Kong benchmarks climbed early Friday in a sign of improved risk sentiment. The S&P 500 advanced 0.4% Thursday, placing the benchmark within striking distance of its peak and also on pace for its third weekly gain, a run not seen since December. Futures for US equities edged lower. Oil rose on Middle East tensions.

A gauge of the dollar dropped 0.1% in early trade, after slumping to a three-year low in the prior session. Treasuries rallied across the curve on Thursday, bringing the 10-year yield six basis points lower to around 4.36%. The gains were supported by the second US inflation print in as many days that came in below consensus forecasts, backing the argument for Fed cuts.

“While market pricing implies that the Fed won’t move on rates until September, the fact that the Fed can, and will cut if needed, still offers some comfort for those remaining in risk assets,” Chris Weston, head of research at Pepperstone Group, wrote in a note.

The producer price index rose 0.1% from a month earlier, compared with the median forecast in a Bloomberg survey of economists that called for a 0.2% increase. A solid sale of long-term US government debt added further impetus for the bond rally, reducing fears that spiraling deficits are causing investors to shun the bonds.

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An index of the dollar touched its lowest level since 2022 as US bond yields fell. The greenback weakened against all Group of 10 currencies Thursday.Geopolitical worries briefly weighed on markets as ABC News reported Israel is considering military action against Iran. President Donald Trump said Israel “could very well” strike Iran but that he had advised against an attack while negotiations over Tehran’s nuclear program were ongoing.

Tariff Outlook

The muted US inflation data offered investors a sign that tariffs have yet to result in higher prices for consumers and businesses.

As more evidence emerged of slowing inflation, Trump reiterated his complaints that the Fed has not moved quickly enough to cut rates. Trump also noted he did not plan to fire Fed Chair Jerome Powell, days after saying he would “soon” pick his nominee to lead the central bank next.

On the trade front, Trump said he may raise US auto tariffs in order to boost domestic auto manufacturing, a move that could further ratchet up tensions with trading partners. Shares of General Motors Co., Ford Motor Co. and Stellantis NV fell.

Meantime, ARK Investment Management founder Cathie Wood said corporate America is regaining its appetite for risk as expectations build around Trump’s push for deregulation and tax cuts.

Speaking on Bloomberg’s Trumponomics podcast during the Founders Forum Global conference in Oxford, Wood said major US firms are ramping up capital spending in response to a more business-friendly policy outlook. She cited Meta Platforms Inc.’s reported investment in the AI startup Scale AI as one sign of that shift.

“While stocks have rebounded and are approaching the record levels seen in February, investors may soon be wondering what could push stocks beyond that threshold,” said Rick Gardner at RGA Investments. “The next catalyst for markets may be a trade deal with China, the extension of the 2017 tax cuts and the prospect of Fed rate cuts as inflation continues to soften.”