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

Asian equities gained after US consumer prices rose in line with expectations, while oil prices held near $80 a barrel amid a standoff between Washington and Tehran

Asian stocks rose on Thursday after US inflation data came in as expected, dampening expectations of further near-term Federal Reserve rate hikes, while oil held near $80 a barrel ​as Washington and Tehran remained deadlocked over efforts to end the Gulf ​war.

MSCI's broadest index of Asia-Pacific shares outside Japan rose 0.97 per cent, led by South Korean shares jumping 4.4 per cent. ‌Japan's Nikkei gained 1.86 per cent, while S&P 500 E-minis were up 0.02 per cent.

US consumer prices increased 0.1 per cent in July, in line with expectations, data showed on Wednesday. The small increase could weaken the argument for an interest rate increase from the Fed next month. Money markets are predicting a 40 per cent chance of a rate hike, down from 54 per cent a week ago, according to CME Group's FedWatch.

 

With August CPI data due before next month's Federal Open Market Committee meeting and crude oil futures rising moderately since July, "both the Fed and markets will likely want to assess the data right up until just before the September FOMC," said Den Miki, senior rate strategist at SMBC Nikko Securities, in a note.

Wall Street ended mixed overnight, with the Nasdaq ‌Composite and the S&P 500 eking out small gains while the Dow Jones Industrial Average slipped. [.N]

Oil prices eased but remained elevated in Asia. US crude fell 0.83 per cent to $82.58 a barrel and Brent fell to $88.35 per barrel, down 0.71 per cent on the day.

Iran and the US remained at loggerheads over efforts to agree a permanent end to the war in the Gulf, with talks to revive a June interim agreement making no headway and no timetable set for its implementation, a senior Iranian source said.

President Donald Trump said the US has "total control" over the ​Strait of Hormuz, a claim swiftly rejected by Iran, which said the route remained blocked.

Against the yen, the dollar softened 0.06 per cent to 159.32, ‌amid growing speculation that the Bank of Japan would hike interest rates next month, earlier than the previously expected December timeline. Those expectations were reinforced by Japan's wholesale prices, which rose 7.2 per cent in July from ​a year earlier, ‌highlighting broadening price pressures.

The dollar index, which measures the greenback against a basket of currencies including the yen and ‌the euro, was steady at 99.93.

The yield on benchmark US 10-year notes rose 0.62 basis points to 4.688 per cent, from 4.682 per cent late on Wednesday.

Reserve Bank of Australia Assistant Governor Christopher Kent said the three cash rate increases earlier this year were having their ‌intended ​effects and would, ​over time, discourage spending.

Speaking at a Reuters NEXT Newsmaker event in Sydney, Kent said it would take "some time for tighter monetary policy to have its full effect on economic activity and inflation."

The ‌Australian dollar held broadly versus ​the greenback at $0.7062.

Spot gold rose 0.28 per cent to $4,419.28 an ounce and spot silver gained 0.3 per cent to $65.50 an ounce.