On Friday, the mood among Asian stock markets was cautious as investors mulled over the Federal Reserve's potential interest rate reductions in light of an uncertain U.S. inflation forecast.
The price of gold reached a new all-time high following a modest producer price inflation report, fueling optimism for Federal Reserve policy easing within the year. Meanwhile, U.S. Treasury yields hovered near five-month peaks, influenced by earlier consumer price data that exceeded expectations, leading to a revision of rate cut expectations.
The U.S. dollar remained strong, close to a five-month peak after nearly a 1% rise over the week against a group of major currencies.
Amid escalating tensions in the Middle East, crude oil prices stayed above the $90 threshold.
Market anticipation has adjusted to foresee less than two quarter-point decreases in the Fed funds rate this year, a downward adjustment from the three cuts forecasted by Fed officials last month, following a swift reevaluation after Wednesday's CPI surprise.
Fed representatives, including Boston Fed President Susan Collins, emphasized the lack of immediate pressure to lower rates, citing the economy's robustness and the uneven decrease in inflation as reasons to hold off on rate reductions in the near term.
Despite the mixed signals, some analysts, like IG's Tony Sycamore, remain optimistic about the equity market's prospects. Sycamore highlighted that if U.S. economic growth stays strong, inflation is kept in check, and the bond market sell-off does not intensify, the environment could still support U.S. equities even without immediate Fed rate cuts.
In Asia Pacific, Japan stood out with the Nikkei 225 index climbing 0.5%, buoyed by a surge in technology stocks and a broader rally among U.S. counterparts, although gains were tempered by a significant drop in Fast Retailing shares after disappointing earnings reports.
Other Asian markets experienced slight declines. The South Korean KOSPI and Singapore's Straits Times Index fell by 0.39% and 0.12%, respectively, as their central banks decided against policy changes.
Hong Kong's Hang Seng index faced the steepest losses, dropping 1.31% due to a downturn in property stocks, while mainland China's blue-chip stocks remained stable.
The broader MSCI index of Asia-Pacific shares outside Japan dipped by 0.3%, yet it is poised to end the week with a 0.52% gain.
Long-term U.S. Treasury yields in Asian trading were near their overnight high, with the dollar reaching a 34-year peak against the yen, prompting intervention warnings from Japan's finance minister.
The dollar index edged up, while the euro saw a slight decline following signals from the European Central Bank of possible upcoming rate cuts.
Gold prices soared to a record high, and crude oil prices increased following geopolitical tensions in the Middle East.
