SYDNEY, May 11 — Asian markets started on a firm footing and the US dollar eased today as softer-than-forecast US inflation data tempered expectations for faster Federal Reserve interest rate rises this year.
Investor sentiment also got a small boost after US President Donald Trump said he had high hopes of “doing something very meaningful” to curtail North Korea’s nuclear ambitions at a summit in Singapore next month.
Clear signs of thawing relationships in the Korean peninsula and the prospect of still expansionary monetary policies in most of the developed world helped whet risk appetite, although concerns remained around US-China trade skirmishes and rising tensions in the Middle East.
MSCI’s broadest index of Asia-Pacific shares outside Japan rose for a second straight session to near three-week highs.
Japan’s Nikkei climbed 0.7 per cent while South Korea’s Kospi added 0.6 per cent. Australian and New Zealand shares were both up 0.2 per cent.
On Wall Street, the Dow rose 0.8 per cent, the Nasdaq Composite gained 0.89 per cent and the S&P 500 rose 0.9 per cent, surging past key resistance of 2,717 points.
Equities gained as investors trimmed their expectations for four Fed rate hikes after inflation data showed price pressures remained weak. The Fed has already raised rates once this year and is widely expected to go twice again in 2018.
The US consumer price index rose 0.2 per cent last month, below analyst forecasts of 0.3 per cent, as a moderation in healthcare prices offset increases in the cost of gasoline and rental accommodations.
The dollar fell the most since late March overnight against a basket of major currencies, while the Mexican peso and Brazilian real jumped more than 1 per cent on the news.
The British pound hit a four-month low versus the greenback after the BoE held key borrowing costs. It was last at US$1.3517, just above yesterday’s trough of US$1.3457 touched.
“Risk appetite rose overnight with US core inflation and unchanged Bank of England both signalling only gradual normalisation in interest rates,” ANZ analysts said in a note.
“Equities liked the contained inflation/rates environment.”
On Friday, the dollar index rose modestly while the euro was barely changed at US$1.1915. The Japanese yen was a tad weaker at 109.52 per dollar.
Malaysian markets were closed today but its newly appointed Prime Minister Tun Dr Mahathir Mohamad emerged with key election pledges including repealing an unpopular goods and services tax and restoring a petrol subsidy.
Ratings agency Moody’s said some campaign promises would be “credit negative” for Malaysia.
Such concerns pushed up the cost of insuring against a Malaysia default, with the country’s five-year credit default swap price at its highest since early June 2017 at 95.090 basis points.
Oil hovered near multi-year peaks amid supply concerns after Trump withdrew from an Iranian nuclear deal and reinstated sanctions.
US crude futures were up 14 cents at US$71.50 (RM285.64) a barrel. Brent crude futures was last quoted at US$77.47 a barrel, after hitting US$78 earlier in the day, their highest since November 2014. — Reuters
Source: The Malay Mail Online