Asian stocks rose on Friday and were poised for the fourth month of gains, while the dollar drifted lower, keeping the yen steady as investors await inflation readings from Europe and the US that will likely dictate the path of interest rates globally.
A downward revision to consumer spending meant the US economy grew more slowly than expected in the first quarter, data showed on Thursday, weighing on Treasury yields and the dollar
The economic data also stoked expectations that the Federal Reserve has scope to cut rates this year, with market pricing putting a September cut at a coin toss, CME FedWatch tool showed. For the year, traders are pricing in 35 basis points of easing.
MSCI’s broadest index of Asia-Pacific shares outside Japan rose 0.55 per cent, pushing away from the three-week low hit on Thursday. The index is set for a 1.4 per cent decline for the week but is up 2.7 per cent in May, rising for the fourth straight month.
Japan’s Nikkei was up 0.20 per cent and is flat for the month. China stocks also rose, with the blue-chip index up 0.23 per cent while Hong Kong’s Hang Seng index spiking 1.3 per cent higher.
The upturn in China’s markets came even as the nation’s manufacturing activity unexpectedly fell in May, an official factory survey showed on Friday. The soft outcome kept alive calls for fresh stimulus as a protracted property crisis continues to weigh on businesses, consumers and investors.
Financial markets have been biding their time for the main data event of the week – Friday’s April report on US core personal consumption expenditures (PCE) price index, which is the Fed’s preferred inflation gauge.
Tony Sycamore, market analyst at IG, said the market is taking a more cautious approach to the European and US PCE inflation data after upside surprises in Australia and German inflation reports earlier this week.
Federal Reserve policymakers continue to expect inflation to fall this year even as the labour market stays strong, leaving them in no hurry to cut the policy rate from the 5.25 per cent-5.5 per cent range they have kept it in since last July.
(With inputs from agencies)
