Asian markets mostly up, tracking Wall Street gains

HONG KONG, China  —Most Asian markets rose Thursday, tracking a rebound in Europe and New York and following positive remarks from a senior Federal Reserve official that inflation was headed in the right direction.

Figures on Tuesday showing the US consumer price index slowed less than expected in January dealt a body blow to hopes of an early interest rate cut and sent Asia indices mostly lower.

But investors returned to buying on expectations borrowing costs will be reduced this year, while traders also cheered strong earnings releases that soothed any worries about companies’ bottom lines.

READ: Rents boost US consumer prices in Jan

“Over time we think it will become clear that January was more one-off vs a new CPI trend,” 22V Research strategists led by Dennis DeBusschere said.

Traders will be closely following the release of the producer price index, which is due at the end of the week.

Stephen Innes, of SPI Asset Management, added that the US stock market’s rebound “offers some respite following the bolt from the blue delivered by inflation figures” on Tuesday.

“Notwithstanding inflation, which is still too high versus arbitrarily defined targets, the US macro picture continues evolving consistently with a soft landing,” he added.

The Fed’s vice chair for supervision, Michael Barr, said the central bank should be “careful” about the timing of interest rate cuts but added that he was “confident” inflation was heading back to the target of two percent.

Japan in recession

“We need to see continued good data before we can begin the process of reducing the federal funds rate,” Barr said.

In Tokyo, official data released Thursday showed Germany overtook Japan last year as the world’s third-biggest economy, primarily because of a sharp fall in the yen.

READ: Japan slips into recession, Germany now world’s third-biggest economy

Japan’s economy grew 1.9 percent last year, though it contracted for a second straight quarter in October-December, pushing it into a technical recession.

Japan’s nominal 2023 gross domestic product in dollar terms was $4.2 trillion, government data showed, compared with $4.5 trillion for Germany, according to figures revealed last month.

Still, Tokyo’s Nikkei rose, while there were also gains in Hong Kong, Sydney, Singapore, Mumbai, Manila and Bangkok.

Taipei’s Taiex stocks hit a record high, fuelled by a surge in chip giant Taiwan Semiconductor Manufacturing Company (TSMC) after it reported strong sales that lifted optimism for the sector and demand for chips used for artificial intelligence.

The Taiex briefly jumped as much as 3.5 percent at the opening, surpassing a January 2022 peak, as traders returned from the Lunar New Year holiday.

“The migration to bigger large language models will boost demand for higher-end chips, which benefits TSMC’s leading-edge foundry business,” according to a note from analysts including Charlie Chan.

Jakarta stocks also rallied after defence minister Prabowo Subianto declared himself the winner in Indonesia’s general election, a result observers said indicated policy continuity.

Wellington and Seoul dipped, while Shanghai was closed for the Lunar New Year break.