Asian stocks were mixed Friday after a rally in U.S. shares and Treasuries on bets that a jump in inflation is likely to be transitory, leaving scope for ongoing central-bank support.
Equities edged up in Hong Kong and dipped in Japan and China. European and U.S. contracts crept higher following a climb in the S&P 500 to a record overnight and a technology rally that boosted the Nasdaq 100. Meme-stocks favored by day traders, such as GameStop Corp., plunged.
The 10-year U.S. Treasury yield held most of a drop to 1.43%, its lowest point since March. The yield had briefly jumped in U.S. hours on above-forecast gains in consumer prices. The dollar retreated.
The U.S. CPI increase in May was driven largely by categories associated with a broader reopening of the economy, as vaccinations bring the pandemic under control. Despite some signs of wider price pressures, concerns about a spike in longer term borrowing costs that could destabilize global markets have eased.
This latest market reaction suggests investors are aligning with the Federal Reserve’s view that inflationary pressures are temporary and that any changes in ultra-accommodative policy will likely happen very gradually. That approach was also reinforced across the Atlantic Thursday, as the European Central Bank raised its inflation forecast and renewed its pledge to maintain faster emergency bond-buying to sustain the euro area.
“The frothiness in CPI continues for now but between base effects and pent-up demand pressures, it is probably not giving a definite answer to the great inflation debate, and you need to read the bond market tea leaves,” said Anu Gaggar, senior global investment analyst at Commonwealth Financial Network. “The bond market is falling in line with the Fed’s thinking that inflation is transitory and does not warrant tapering of monetary stimulus any time soon.”
In South Korea, bonds extended losses after the central bank chief’s comments on normalizing policy added to signs the nation may be among the first in Asia to hike interest rates.
Elsewhere, crude oil stayed around $70 a barrel. Bitcoin remains steady for the week at about $36,830. Later Friday, investors will be keeping an eye on the opening of the Group of Seven leaders’ summit in the UK.
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These are some of the main moves in markets:
- S&P 500 futures rose less than 0.1% as of 7:10 a.m. in London. The index rose 0.5%
- Nasdaq 100 futures were up 0.1%. The gauge rose 1.1%
- Japan’s Topix index dipped 0.1%
- Australia’s S&P/ASX 200 index rose 0.2%
- South Korea’s Kospi index added 0.7%
- Hong Kong’s Hang Seng index climbed 0.5%
- China’s Shanghai Composite gauge slid 0.3%
- Euro Stoxx 50 futures increased 0.1%
- The Bloomberg Dollar Spot Index lost 0.1%
- The euro was at $1.2190, rising 0.2%
- The British pound traded at $1.4176
- The Japanese yen was at 109.41 per dollar
- The offshore yuan was at 6.3843 per dollar
- The 10-year U.S. Treasury yield rose one basis point to 1.44%
- West Texas Intermediate crude traded at $70.29 a barrel
- Gold traded at $1,901.44 an ounce, up 0.2%
— With assistance by Richard Richtmyer, and Kamaron Leach