Published: Tuesday, May 14, 2020
HONG KONG – Asian stocks rose on Wednesday, largely following a Wall Street rally that took the Nasdaq Composite Index to a new record high.
The producer price index for April was 0.5% higher than expected.
Inflation has increased in 2024. This raises concerns that the Federal Reserve may have difficulty bringing inflation down to its target of 2%.
Investors were reassured, however, by the comments of Fed Chair Jerome Powell. He reaffirmed at a Tuesday panel discussion in Amsterdam that the U.S. Central Bank will not likely increase its key interest rate as a response to stubborn inflation. He also stated that his confidence in inflation easing is “not as strong as it used to be” due to the persistent price rises that have occurred over the first three month of this year.
The markets will be put to the test later on Wednesday when the U.S. releases its monthly update of consumer prices or inflation experienced by households. Economists anticipate that the consumer price index will ease to 3.4% on an annual basis in April.
In Asian trading, Tokyo Nikkei 225 rose 0.4% to 38491.15 while Australia’s S&P/ASX 200 climbed 0.4% at 7,760.40.
The Shanghai Composite Index fell 0.4% in China to 3,133.47, after the central banks kept the key lending rate at the same level on Wednesday. This was a signal that Beijing is focused on maintaining monetary stabilty.
In Bangkok, the SET was almost unchanged.
The markets in South Korea, Hong Kong and Taiwan were closed on a public holiday.
The Dow Jones Industrial Average and S&P 500 index both rose by 0.3% on Tuesday to 39,558.18 and 5,246.68 respectively.
The Nasdaq Composite, heavily influenced technology stocks, rose 0.8% to 16 511 18. The tech sector is responsible for most of the gains in the market this year.
In a repeat of the frenzy fueled by social media three years ago, several “meme” stock, such as GameStop, AMC Entertainment and others, soared in price. GameStop rose 60.1%, and AMC rose 32.2%. Both stocks have given back a lot of the gains they had earlier in the morning.
Bond yields are edging lower. The 10-year Treasury yield dropped to 4.44%, from 4.49% on Monday.
Investors are reducing their expectations of the pace and frequency of rate cuts in this year, as inflation is higher than expected. CME Group data shows that traders are betting on only one or two interest rate cuts in 2018.
Wall Street still hopes that the Fed will pull off a “soft landing,” in which high interest rates cool inflation while not causing the economy to enter a recession. Consumers may be feeling the strain of persistent inflation, even though the economy is still strong. The retail sales report due on Wednesday is expected to show a softening in consumer spending, as it has been for the past few months.
Other trading saw benchmark U.S. Crude rise 72 cents a barrel to $78.74 in electronic trading at the New York Mercantile Exchange. Brent crude, which is the international standard, increased 65 cents to $83 a barrel.
The U.S. Dollar dropped to 156.38 Japanese Yuens from 156.42 Japanese Yens in currency trading. The euro now costs $1.0824 compared to $1.0820.
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Damian Troise, AP Business Writer, contributed.
Source: ABC News