Stocks muted, gold at new peak as markets weigh Fed cut timing

Asian equities were in a subdued mood on Friday, as investors pondered the path for Federal Reserve (Fed) interest rate cuts amid a murky US inflation outlook.

Gold rose to a fresh all-time peak, after a mild reading for producer price inflation kept alive hopes for Fed easing this year, though US Treasury yields stuck close to five-month highs in the wake of hotter-than-expected consumer price data mid-week that forced a paring back of rate cut bets, reports Reuters.

The dollar hung near a five-month high following a nearly 1% gain this week against a basket of major peers. 

Crude oil continued to trade north of the US$90 mark amid a flare-up in Middle East tensions.

Markets now expect fewer than two quarter point reductions to the Fed funds rate this year, below the three cuts Fed officials had pencilled in last month, after rushing to trim easing bets following Wednesday's CPI shock.

Fed officials said on Thursday that there was no urgency to ease, with Boston Fed president Susan Collins saying the strength of the economy and uneven retreat in inflation argued against a near-term push to lower rates.

However, IG analyst Tony Sycamore remains bullish on the outlook for equities.

"Putting the pieces together at the end of a busy week, if US economic growth remains resilient, inflation remains contained, and the sell-off in the bond market doesn't accelerate, the backdrop for US equity markets remains supportive, even without Fed rate cuts," he said.

Japan was the only real bright spot around the Asia Pacific on Friday, with the Nikkei 225 up 0.5 per cent.

Tech shares led the way, drawing inspiration from a rally in US peers overnight. Gains for the index would have been even bigger but for the steep slide in shares of heavily weighted Fast Retailing, owner of the Uniqlo chain, following disappointing earnings.

Elsewhere, markets mostly suffered small losses. South Korea's KOSPI slipped 0.39% and Singapore's Straits Times Index was off 0.12 per cent. Central banks in both countries opted to keep policy unchanged on Friday.

The worst losses were in Hong Kong, with the Hang Seng sliding 1.31 per cent as property shares weighed. Mainland China's blue chips were flat.