Asian stocks were heading for a fifth straight month of gains on Friday, bolstered by growing sentiment that cooling inflation in the United States would allow the Federal Reserve to ease rates later this year.
Friday is packed with risky events for markets after a relatively muted rest of the week, with Democratic US President Joe Biden and his Republican rival Donald Trump set to take the stage at 0100 GMT in their first debate of the year ahead of the US presidential election in November.
Chinese markets, in particular, will be watching for comments on the trade relationship with Beijing, which has soured further in recent years.
On the data front, U.S. May core personal consumption expenditure (PCE) price index figures – the Fed’s preferred measure of inflation – will be released later on Friday, and could offer more Clarity on the outlook for US interest rates.
“If tonight’s core PCE inflation comes in much higher than the 2.6% forecast, and following the upside surprises in Canadian and Australian inflation data this week, it would fuel concerns that the decline in global inflation has bottomed and may have re-accelerated in some countries,” said Tony Sycamore, market analyst at IG.
MSCI’s broadest index of Asia-Pacific shares outside Japan rose 0.06% in early Asian trading, and was on track to gain about 3.2% for the month, its best showing since February.
Rising expectations of an imminent Fed easing cycle and the boost from the artificial intelligence boom have sparked a spike in risk across stock markets and catapulted Wall Street to all-time highs, which in turn has lifted stocks. Asian
Traders now rate the chance of a first Fed cut in September at 64%, up from 50% a month ago, according to CME’s FedWatch tool.
Japan’s Nikkei rose 0.78%, reversing some of its losses from the previous session. A monthly gain of 3% was forecast, helped by the weakness of the yen and the rally in technology stocks.
S&P 500 and Nasdaq futures rose 0.18% and 0.3%, respectively.
In currencies, the yen continued to languish near 38-year lows on the weaker side of $160 per dollar, leaving markets on alert for any intervention by Japanese authorities to prop up the currency.
The yen last rose marginally to 160.68 per dollar, but was set to lose more than 2% on the month as it continues to be hit by sharp interest rate differences between the US and Japan.
“Given that the current pace of depreciation is slower than in April, there should be no reason why 160 has to be the line in the sand,” said Vincent Chung, associate portfolio manager of T. Rowe Price’s diversified income bond strategy.
“Most expectations suggest that intervention would likely occur if there were a rapid depreciation to 163.”
Tokyo spent 9.79 trillion yen ($60.94 billion) in late April and early May to push the yen up 5 percent from its 34-year low of 160.245.
Data on Friday showed that core consumer prices in Japan’s capital rose 2.1% in June from a year earlier, highlighting the challenge the Bank of Japan faces in scheduling its next interest rate hike as cost pressures from the weak yen keep inflation above its 2% target but also hurt consumption.
The euro rose 0.04 percent to $1.0707, but was on track for a monthly decline of 1.3 percent as the common currency remains weighed down by political turmoil in the bloc, with early elections in France scheduled for this weekend.
In the commodity markets, gold felt the weight of the firm dollar and fell 0.14% to $2,324.12 an ounce.
Brent crude futures rose 0.24% to $86.60 a barrel, while US West Texas Intermediate crude futures gained 0.29% to $81.97 a barrel.
