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

Asian stocks experienced a surge on Thursday as US inflation data proved to be in line with expectations, causing a decline in the likelihood of an imminent Federal Reserve rate hike. The MSCI's Asia-Pacific index, excluding Japan, gained 0.97 percent, fueled by South Korean equities, which surged by 4.4 percent. Japan's Nikkei increased by 1.86 percent, while S&P 500 E-minis were up by just 0.02 percent.

July consumer prices in the United States rose by 0.1 percent, aligning with forecasts, suggesting that the Federal Reserve might not raise interest rates in September. Money markets now anticipate a 40 percent probability of a rate hike, a significant drop from 54 percent a week ago, according to CME Group's FedWatch. With August Consumer Price Index (CPI) data set to be released before the Federal Open Market Committee's meeting, the Fed and markets will closely monitor the data leading up to the September Federal Reserve meeting, as noted by Den Miki, a senior rate strategist at SMBC Nikko Securities.

Wall Street concluded with mixed results, with the Nasdaq Composite and S&P 500 posting slight gains, while the Dow Jones Industrial Average slipped. Oil prices edged lower but remained around $80 a barrel in Asia, with US crude falling 0.83 percent to $82.58 a barrel, and Brent crude down 0.71 percent to $88.35 per barrel. Iran and the United States remain at odds over efforts to finalize a permanent end to the Gulf conflict, with talks to renew a June interim agreement making no progress and no timeline set for its implementation, according to an Iranian source.

President Donald Trump claimed the US holds complete control over the Strait of Hormuz, a statement Iran promptly refuted, stating the route remained blocked. Meanwhile, the dollar weakened by 0.06 percent against the yen, now trading at 159.32, amid mounting speculation that the Bank of Japan may raise interest rates sooner than previously expected in December.

This sentiment was bolstered by Japan's wholesale prices, which climbed by 7.2 percent in July compared to a year earlier, indicating mounting inflationary pressures. The dollar index, which tracks the greenback against a basket of currencies, including the yen and the euro, remained steady at 99.93. The yield on the benchmark US 10-year note rose by 0.62 basis points to 4.688 percent, from 4.682 percent late on Wednesday.

The Reserve Bank of Australia's Assistant Governor, Christopher Kent, stated that the three interest rate hikes implemented earlier this year are achieving their intended effects and, over time, may curb spending. Speaking at a Reuters NEXT Newsmaker event in Sydney, Kent added that it would take some time for tighter monetary policy to fully impact economic activity and inflation.

The Australian dollar remained relatively stable against the US dollar at US$0.7062, while spot gold increased by 0.28 percent to $4,419.28 per ounce, and spot silver rose by 0.3 percent to $65.50 per ounce.