Asian Stocks Eye Calm Start as U.S. Shrugs Off CPI: Markets Wrap

(Bloomberg) -- Asian stocks look set for a steady open Friday after U.S. shares and Treasuries rallied as investors judged that a jump in inflation is likely to be transitory, leaving scope for ongoing central-bank support.

Futures rose in Japan and Hong Kong but were little changed in Australia. The S&P 500 Index climbed to a record overnight, while a technology rally boosted the Nasdaq 100. Meme-stocks favored by day traders, such as GameStop Corp., plunged. U.S. equity contracts fluctuated in early trading.

The 10-year Treasury yield fell to 1.43%, its lowest point since March, after a brief jump following a report showing above-forecast gains in U.S. consumer prices. The dollar held a drop.

The CPI increase in May was driven largely by categories associated with a broader reopening of the economy, as vaccinations bring the pandemic under control. Despite some signs of wider price pressures, concerns about a spike in longer term borrowing costs that could destabilize global markets have eased.

This latest market reaction suggests investors are aligning with the Federal Reserve’s view that inflationary pressures are temporary and that any changes in ultra-accommodative policy will likely happen very gradually. That approach was also reinforced across the Atlantic Thursday, as the European Central Bank raised its inflation forecast and renewed its pledge to maintain faster emergency bond-buying to sustain the euro area.

“The frothiness in CPI continues for now but between base effects and pent-up demand pressures, it is probably not giving a definite answer to the great inflation debate, and you need to read the bond market tea leaves,” said Anu Gaggar, senior global investment analyst at Commonwealth Financial Network. “The bond market is falling in line with the Fed’s thinking that inflation is transitory and does not warrant tapering of monetary stimulus any time soon.”

Elsewhere, crude oil trimmed a rally while staying above $70 a barrel. A decision by international banking regulators to classify Bitcoin as the riskiest of assets buffeted the virtual currency, but it remains higher for the week at about $36,700. Later Friday, investors will be keeping an eye on the opening of the Group of Seven leaders’ summit in the U.K.

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These are some of the main moves in markets:

Stocks

• S&P 500 futures were steady as of 7:44 a.m. in Tokyo. The index rose 0.5%
• Nasdaq 100 futures were up less than 0.1%. The gauge rose 1.1%
• Nikkei 225 futures advanced 0.2%
• Australia’s S&P/ASX 200 Index futures were little changed
• Hong Kong’s Hang Seng Index futures rose 0.5% earlier

Currencies

• The Bloomberg Dollar Spot Index was stable
• The euro was at $1.2172
• The British pound traded at $1.4172
• The Japanese yen was at 109.39 per dollar

Bonds

• The 10-year Treasury yield declined six basis points to 1.43%

Commodities

• West Texas Intermediate crude dipped 0.2% to $70.16 a barrel
• Gold traded around $1,898 an ounce

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