(Bloomberg) — Stocks rose to a record after an in-line US inflation reading bolstered speculation the Federal Reserve will have room to cut interest rates in September.
The MSCI All Country World Index rose 0.1% to an all-time high, tracking Wall Street’s surge to fresh peaks. A gauge of Asian shares rose 0.7%, helped by a record for the Nikkei-225 index in Japan. A gauge of shares listed in Shanghai jumped to their highest level since December 2021. The dollar was steady after falling in the prior session. Treasuries dipped with the yield on the 10-year inching up to 4.30%.
While underlying inflation accelerated to its fastest pace since the start of the year, a modest rise in goods prices eased concerns that trade-related costs could spill over into broader price pressures. With the CPI report now behind them, investors will turn their attention to Friday’s US retail sales data for signs that consumers are as upbeat as corporate earnings commentary suggested.
“Inflation is on the rise, but it didn’t increase as much as some people feared,” said Ellen Zentner at Morgan Stanley Wealth Management. “In the short term, markets will likely embrace these numbers because they should allow the Fed to focus on labor-market weakness and keep a September rate cut on the table.”
Treasuries edged down amid concern hasty Fed policy easing may drive up US inflation again. Money markets nearly priced in a full 25 basis point Fed reduction next month.
Japanese bonds declined ahead of a five-year note auction against the backdrop of renewed concerns over poor liquidity and volatility in the nation’s debt market.
The Fed has kept rates unchanged this year in hopes of gaining clarity on whether tariffs will lead to sustained inflation. At the same time, the labor market — the other half of their dual policy mandate — is showing signs of losing momentum.
“This inflation print supports the narrative of an insurance rate cut in September, which will be a key driving force for the markets,” said Alexandra Wilson-Elizondo at Goldman Sachs Asset Management. “With inflation contained and labor market softness increasingly evident in revised payroll data, the emphasis will now be skewed toward employment.”
In a social media post, President Donald Trump resumed his criticism of Jerome Powell over the central bank’s decision to hold rates steady.
Trump also said he is weighing a lawsuit against the Fed chief over the renovation of the central bank’s headquarters – a project whose cost overruns have drawn scrutiny.
“I think the real thing now to think about is should we get a 50 basis-point rate cut in September,” Treasury Secretary Scott Bessent told Fox Business. He said the Fed could have cut rates in June or July if they’d had the “original” data.
In Asia, China will implement more levies on Canadian rapeseed after an anti-dumping probe, escalating a trade spat that’s disrupted crop flows.
Corporate News:
China Evergrande Group said its Hong Kong stock will be delisted, marking the end of an era for the former high-flying developer whose demise came to symbolize the country’s property bust. Commonwealth Bank of Australia profit met estimates as home-loan growth and lending to businesses supported the country’s biggest lender. Sea Ltd.’s American depositary receipts jumped after second-quarter sales beat analysts’ estimates as more of Southeast Asia’s consumers turned to online shopping. Kweichow Moutai Co. delivered its worst six-month growth in sales or profit in years as China’s top distiller struggled with weak consumer demand for premium beverages. Qantas Airways and other Asian airline stocks follow US peers higher after oil declined. Some of the main moves in markets:
Stocks
S&P 500 futures were little changed as of 10:57 a.m. Tokyo time Japan’s Topix rose 1.1% Australia’s S&P/ASX 200 fell 0.7% Hong Kong’s Hang Seng rose 0.9% The Shanghai Composite rose 0.3% Euro Stoxx 50 futures rose 0.2% Currencies
The Bloomberg Dollar Spot Index was little changed The euro was little changed at $1.1677 The Japanese yen fell 0.2% to 148.08 per dollar The offshore yuan was little changed at 7.1863 per dollar Cryptocurrencies
Bitcoin fell 0.6% to $119,462.44 Ether fell 0.9% to $4,580.45 Bonds
The yield on 10-year Treasuries was little changed at 4.29% Japan’s 10-year yield advanced 2.5 basis points to 1.510% Australia’s 10-year yield was little changed at 4.24% Commodities
West Texas Intermediate crude fell 0.1% to $63.10 a barrel Spot gold was little changed This story was produced with the assistance of Bloomberg Automation.
