Asian stocks rise as US inflation data dents Sept Fed hike bets

Asian stock markets rallied on Thursday following US inflation data that surpassed expectations, casting doubt on the possibility of an imminent Federal Reserve interest rate hike. South Korean equities led the surge, soaring 4.4%. Meanwhile, Japan's Nikkei index climbed 1.86%, and S&P 500 E-minis edged up by 0.02%. US consumer prices rose by 0.1% in July, aligning with market forecasts.

This modest increase may reduce the likelihood of a rate hike by the Fed in the coming month, according to CME Group's FedWatch, which now anticipates a 40% probability of an increase, down from 54% a week prior. Analysts suggest that both the Federal Reserve and the market will closely scrutinize the upcoming August CPI data prior to the September FOMC meeting.

Wall Street witnessed a mixed session, with the Nasdaq Composite and S&P 500 registering slight gains, while the Dow Jones Industrial Average experienced a marginal decline. Oil prices experienced a slight decline but remained above US$80 a barrel. Iran and the US continued their standoff over attempts to finalize a lasting resolution to the Gulf war deadlock, with nuclear talks making no progress.

President Trump claimed exclusive control over the Strait of Hormuz, a statement Iran dismissed, stating the waterway remains blocked. The US dollar weakened by 0.06% against the yen, reaching 159.32, reflecting optimism that the Bank of Japan may lift interest rates sooner than expected in December. Japan's wholesale prices surged 7.2% in July, indicating widening inflationary pressures.

The dollar index, which gauges the greenback's value against a basket of currencies including the yen and the euro, remained stable at 99.93. The yield on the benchmark US 10-year note increased by 0.62 basis points to 4.688%, from 4.682% late on Wednesday. Reserve Bank of Australia Assistant Governor Christopher Kent stated that the three interest rate hikes implemented earlier this year are yielding the desired outcomes and will eventually impede economic activity and inflation.

The Australian dollar held steady against the US dollar at US$0.7062. Spot gold and silver both saw modest gains, rising 0.28% and 0.3%, respectively, to US$4,419.28 and US$65.50 an ounce.