Asian stocks firm before US inflation test; yen gains

Chinese equities and most other regional stock markets climbed on Thursday, while the dollar held its ground against European rivals ahead of crucial US inflation data that could provide fresh clues on when the Federal Reserve will cut interest rates.

The yen gained as a Bank of Japan (BOJ) official hinted at the need to exit ultra-easy monetary stimulus.

Cryptocurrency bitcoin climbed back toward the more than two-year high of $63,933 touched overnight, following a three-day, 24 per cent ascent.

Wall Street futures were largely flat, following declines for all three major indexes overnight. S&P 500 futures pointed down 0.04 per cent and Nasdaq futures fell 0.06 per cent.

Pan-European STOXX 50 futures added 0.06 per cent.

Investors are wary ahead of the release later in the day of the Fed’s preferred inflation gauge, the personal consumer expenditures (PCE) price index, after dialling back bets for a first rate cut to June. At the start of the year, wagers were on the Fed cutting rates in March.

Thursday also sees inflation data from German states, France and Spain, ahead of the euro area’s figures on Friday.

Mainland Chinese blue chips (.CSI300) jumped more than 1 per cent, recovering after a 1.27 per cent slide in the previous session, amid hopes that more aggressive stimulus steps will emerge from next week’s annual session of the National People’s Congress, when the year’s growth target will be set.

For the month, the CSI 300 index is up 8.6 per cent - which would be its best monthly performance since November 2022 and would snap a six-month streak of declines - supported mainly by state-led buying and tighter regulations.

Hong Kong’s Hang Seng (.HSI) added 0.13 per cent, Taiwan (.TWII) advanced 0.6 per cent, and Australia (.AXJO) gained 0.5 per cent.

MSCI’s broadest index of Asia-Pacific shares outside Japan (.MIAPJ0000PUS) rose 0.22 per cent.

Japan’s Nikkei share average (.N225) though, ended the day down 0.11 per cent, easing back a little further from the record high touched on Tuesday.

“Price action has been very subdued going into the (US inflation data), which signals some cautiousness,” said Kyle Rodda, senior markets analyst at Capital.com.

“Estimates are for a pretty positive number, so I think market participants will want to see that confirmed in the actual release before moving into risk assets.”

At the same time, “China is doing its own thing, and has been for a while,” Rodda said.

The US dollar index , which measures the currency against six major peers including the yen, euro and sterling, edged 0.06 per cent lower to 103.87.

Most of that was driven by a dip against the yen, after BOJ board member Hajime Takata said in a speech the central bank needs to consider “nimble and flexible responses”, including ending policies such as negative interest rates and yield curve control.

Analysts and investors have been primarily expecting the BOJ to exit negative rates in April, with a risk of a move in March.

“Takata’s comments are a reminder that BOJ is time-pressed if they want to move away from negative interest rates,” said Charu Chanana, head of currency strategy at Saxo.

“If spring wage negotiations send a positive signal, March and April meetings could be live, but having said that, fiscal and balance sheet concerns would continue to limit the room for BOJ normalisation, and we expect only modest and gradual moves.”

The dollar dropped 0.54 per cent to 149.815 yen , falling through the closely watched 150 line for the first time in more than a week.

The euro was little changed at $1.0835, and sterling was flat at $1.26635.

Benchmark US 10-year Treasury yields were stable at around 4.28 per cent.

Bitcoin was 4.2 per cent higher at $63,120, after jumping to the cusp of $64,000 overnight for the first time since November 2021, and bringing the all-time high of $68,999.99 into sight.

“If this were any other market, it would likely be in the ‘blow-off top - don’t go near that bubble’ category, but bitcoin is back in its parabolic-rally phase, with no immediate signs of a top,” said Matt Simpson, senior market analyst at City Index.

In commodities, oil prices extended the previous session’s declines after a larger-than-expected build in US crude stockpiles stoked worries about slow demand, while signs that US interest rates could remain elevated added to pressure.

Brent crude futures fell 14 cents, or 0.2 per cent, to $83.54 a barrel. US West Texas Intermediate crude futures were down 4 cents, or 0.1 per cent, to $78.50 a barrel.