Asian Shares Trade Higher After U.S. June Inflation Slows More Than Expected

Asian stocks rose sharply on Thursday, tracking gains in US markets, after the American inflation rate for June came in lower than expected at 3%, the smallest year-over-year increase in two years.

The Hang Seng index in Hong Kong was leading regional advances as of 9.30 a.m. Bangkok time, up 2.40%.

The Shanghai Composite Index rose 0.65%. The Chinese trade data for June is expected later today.

The Kospi in South Korea increased by 1.01% after the Bank of Korea maintained its benchmark policy rate at 3.5%.

Australia’s S&P/ASX 200 was up 1.36%, while in Japan, the Nikkei 225 climbed 1.23%.

Overnight in the United States, gains were seen across the board for the three major indices, with the S&P 500 increasing by 0.74% to a new high for 2023 and the Nasdaq Composite rising by 1.15%. The two indices both finished at record highs for the first time since April of 2022. In the meantime, the Dow Jones Industrial Average gained 0.25%.

The U.S. inflation recorded its smallest annual increase in more than two years in June as price pressure started to slow down in the world’s largest economy.

In June 2023, the consumer price index rose 3% from a year ago. Meanwhile, prices rose 0.2% in June from a month prior after gaining 0.1% in May. The reading was lower than Dow Jones estimates for 3.1% YoY increase and 0.3% MoM increase. 

Still, the positive sentiment from lower prices did not change the market expectation for the Federal Reserve to raise the policy rate in July. CME FedWatch Tool still showed 92.4% odds that the Fed will step back into the hike cycle with a raise of 25 basis points.