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Asian Stocks Mixed as Wall Street's Reversal Offsets Soft US Inflation Data
- •Asian markets showed mixed reactions as investors weighed Wall Street's late reversal against softer US inflation data.
- •Hang Seng futures fell 0.7%, South Korea's Kospi lost 0.62%, while Japan's Nikkei 225 climbed 1.28% and Topix slipped 0.56%.
- •US inflation, measured by the PCE index, rose 0.3% month-on-month in August, with annual PCE at 3.4% and core PCE at 3%, both below projections.
- •The softer inflation data reduced the likelihood of an interest rate hike at the Fed's October meeting to less than 40%.
- •Bank of Japan policymakers are now focused on preventing inflation from overshooting the 2% target, with a recent rate hike to 1.25%.
Key Questions Answered
Asian markets opened October with little direction as investors weighed a sharp late reversal on Wall Street that erased gains from softer US inflation data, with Hang Seng futures falling 0.7%, South Korea's Kospi losing 0.62%, and Japan's Nikkei 225 climbing 1.28% while the Topix slipped 0.56%.
The US Personal Consumption Expenditure (PCE) index rose 0.3% month-on-month in August, with annual PCE inflation coming in at 3.4% and core PCE rising 3% year-on-year, both well below economist expectations. These figures significantly reduced the likelihood of an interest rate hike at the Federal Reserve's October meeting, with money markets pricing in less than a 40% chance of an increase.
Brent crude settled around $98 a barrel after spiking as high as $104 intraday, while West Texas Intermediate slipped 0.4% to $90.07. Wall Street analysts noted that crude flows from West Asia were nearing pre-war levels and oil exports were flowing again despite the ongoing conflict in the region.
