TOKYO – Asian shares mostly surged Friday after Wall Street's winning streak barreled into a fourth day, buoyed by the latest signal that inflation may be easing.
Japan's benchmark Nikkei 225 lost earlier gains, ending down 0.1% at 32,391.26. Australia's S&P/ASX 200 rose 0.9% to 7,308.50. South Korea's Kospi jumped 1.3% to 2,623.83. Hong Kong's Hang Seng edged up 0.4% to 19,433.22, while the Shanghai Composite added 0.1% to 3,240.96.
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“Positive sentiment within Asian equity markets gathered pace as investors welcomed the easing inflation momentum,” Anderson Alves at ActivTrades said in a commentary.
Market watchers are also looking ahead to regional data expected next week, including consumer prices in Japan and China's GDP.
On Wall Street, the S&P 500 rose 0.8% to 4,510.04, its highest close since April 2022. The Dow Jones Industrial Average rose 0.1% to 34,395.14, and the Nasdaq composite rallied 1.6% to 14,138.57 as Big Tech stocks led the way.
The S&P 500 is on track for its seventh winning week in the last nine after more data raised hopes that inflation is cooling enough to get the Federal Reserve to soon end its blistering run of hikes to interest rates. Inflation at the wholesale level slowed more than expected in June, and prices paid by producers were just 0.1% higher during the month than a year earlier. That’s down from 11.2% inflation last summer.
High inflation has been the main reason investors have been fearing a possible recession, because of how high the Federal Reserve has cranked interest rates to get prices under control. High rates undercut inflation by bluntly slowing the entire economy and hurting prices for investments. They can also cause unanticipated parts of the economy to break.
Traders remain nearly convinced the Fed will raise the federal funds rate at its next meeting in two weeks to its highest level since 2001. But this week’s inflation data has also pushed traders to build bets for that to be the final rate increase of this cycle.
A report on Wednesday showed that prices consumers paid in June were 3% higher than a year earlier, down from inflation of more than 9% last summer. It’s been a “cool summer breeze,” as Deutsche Bank economists describe it.
Easier interest rates help all kinds of investments. But many investors see big technology and other high-growth stocks among the biggest beneficiaries.
That had Amazon, Alphabet and Nvidia among the strongest forces pushing up the S&P 500. Amazon gained 2.7% after it said the first day of its annual Prime Day event on Tuesday was the biggest sales day in its history.
Alphabet rose 4.7% after Google said it’s rolling out Bard, its chatbot powered by artificial intelligence, to more countries around the world and launching new features for it.
Nvidia, which has been at the center of a frenzy on Wall Street around AI, rose 4.7%.
A resilient job market has been keeping the economy out of a recession, though too strong employment could push the Federal Reserve to get more aggressive about raising interest rates. A report on Thursday showed fewer workers applied for unemployment benefits last week than expected.
While inflation is showing encouraging signals, Wall Street may be piling too quickly into a consensus that it will keep cooling enough for the Fed to ease up on rates and prevent a recession, warned Chun Wang, senior research analyst and co-portfolio manager at Leuthold.
In a report, Wang said the market may be underestimating the risk that inflation stays stuck at 3% to 4% in the next six to 12 months and that “the path forward for both inflation and the Fed policy is not a no-brainer at all. We get the sneaking suspicion that the current soft landing narrative will be seriously challenged before the first leaf falls from the tree.”
In energy trading, benchmark U.S. crude added 16 cents to $77.05 a barrel in electronic trading on the New York Mercantile Exchange. It picked up $1.14 on Thursday to $76.89 a barrel.
Brent crude, the international standard, rose 12 cents to $81.48 a barrel.
In currency trading, the U.S. dollar edged down to 137.83 Japanese yen from 138.05 yen. The euro cost $1.1222, down from $1.1228.