Asian stocks rise as Fed rate cut bet lifts market; Nikkei hits record high

Stocks in Asia climbed and the US dollar was subdued on Wednesday, as data showed both resilience in major economies and the need for central banks to remain accommodative.

Wall Street scaled new heights on Tuesday, driven by increasing certainty the Federal Reserve will cut interest rates next month. Japan's Nikkei broke through the 43,000 level for the first time and cryptocurrency ether rose to an almost four-year high.

The highly-anticipated US inflation readings indicated President Donald Trump's tariff regime had yet to filter down to consumer prices. In Japan, a report showed manufacturers grew more confident about business conditions after a trade agreement with the United States.

 

"It's clear that almost any good news leads investors to pile money into markets, particularly tech stocks, despite their lofty price tags," Paco Chow, dealing manager at Moomoo Australia and New Zealand, wrote in a note to clients.

"They're riding on 95 per cent odds of a Fed rate cut in five weeks and feeling comfort that inflation is only creeping higher, not running amok," Chow said.

The MSCI All Country World Index of shares climbed for a second day to reach 948.54, a new all-time high. Japan's Nikkei stock index rose 1.4 per cent, also setting a new peak for a second-straight session.

US Labor Department data showed the consumer price index rose 2.7 per cent in the 12 months through July, slightly below the 2.8 per cent rate that economists polled by Reuters had forecast.

A Reuters Tankan poll that tracks the Bank of Japan's quarterly tankan business survey showed Japanese manufacturers' sentiment index improved for a second straight month. Another report showed Japan's wholesale inflation slowed in July, underscoring the central bank's view that upward price pressure from raw material costs will dissipate.

On Wall Street, the benchmark S&P 500 and the Nasdaq hit record highs after President Trump signed an executive order pausing triple-digit levies on Chinese imports for another 90 days.

Traders are pricing in a 94 per cent chance of a Fed cut in September, up from nearly 86 per cent a day ago and about 57 per cent a month earlier, according to the CME FedWatch tool.

Investors had been on tenterhooks about the inflation data because it followed a surprisingly weak jobs report on August 1 and had the potential to stoke concerns about stagflation.

Trump has nominated White House adviser Stephen Miran to temporarily fill a vacant board seat at the US central bank, stirring up speculation about presidential interference in monetary policy.

And the White House said it was "the plan" that the Bureau of Labor Statistics would continue to publish its closely watched monthly employment report after Trump's pick to head the agency E.J. Antoni proposed suspending its release.

Speculation the labour report would be halted has "done the USD no favours and would have only incentivised foreign investors to review their hedging ratios on US investments," Chris Weston, head of research at Pepperstone, said in a note.

The dollar was little changed at 147.84 yen. The euro edged up 0.1 per cent to $1.1684, after a 0.5 per cent jump in the previous session. The dollar index, which tracks the greenback against a basket of major peers, slid for a second day.

Ether touched $4,634.70, the highest since December 2021, in early trading before sliding 0.9 per cent.

US crude dipped 0.05 per cent to $63.14 a barrel. Spot gold was little changed at $3,348.1 per ounce.

In early trade, pan-region Euro Stoxx 50 futures were up 0.2 per cent, German DAX futures rose 0.3 per cent and FTSE futures climbed 0.1 per cent. US stock futures, the S&P 500 e-minis, were little changed.