Asian shares rose on Thursday following record-breaking gains in U.S. stocks, driven by hopes that inflation is moderating. A report showed that consumer prices in the U.S. rose by 3.4% in April compared to a year earlier, which was slightly lower than March’s inflation rate of 3.5%. This news, along with expectations of a potential interest rate cut by the Federal Reserve, boosted investor confidence. In Asian trading, major indexes in Japan, Hong Kong, Shanghai, Australia, South Korea, Taiwan, and India all advanced.
On Wednesday, the S&P 500, Dow Jones Industrial Average, and Nasdaq all closed at new highs, with stocks benefiting from lower interest rates leading the market. Homebuilders, big tech companies, and real estate stocks saw gains on the prospect of easier mortgage rates and improved dividends compared to lower bond yields. However, GameStop and AMC Entertainment experienced losses as momentum from earlier in the week reversed. AMC Entertainment announced plans to issue shares to reduce debt, leading to a decline in its stock price.
A separate report on U.S. retail sales showed no growth in April compared to March, which could have mixed implications for the market. While slowing retail sales may ease inflationary pressures, it could also weaken consumer spending, an important driver of economic growth. In the bond market, yields on the 10-year Treasury and two-year Treasury eased, reflecting expectations of a Fed rate cut. Traders are now predicting a high likelihood of at least one rate cut by the Fed this year.
Investors are closely monitoring developments in the bond market, as well as other economic indicators, to gauge the likelihood of further central bank intervention. Global oil prices also saw gains on Thursday, with U.S. benchmark crude rising to $79.05 per barrel and Brent crude reaching $83.14 per barrel. The U.S. dollar weakened against the Japanese yen but rose slightly against the euro. Overall, market sentiment remains optimistic based on the recent trends in inflation, interest rates, and economic data.
While concerns about inflation and interest rates persist, the market’s focus on consumer spending, corporate earnings, and geopolitical developments will continue to drive sentiment in the near term. Companies across various sectors are closely monitoring these factors and adjusting their strategies accordingly. As central banks and governments navigate the challenging economic environment, investors are looking for clues on the direction of monetary policy and its potential impact on global markets. The overall outlook remains positive, with hopes for sustained economic growth and stability in the financial markets.
