Asian stocks gain ahead of key US inflation data: Markets wrap

(Bloomberg) — Stocks rose in Asia following gains on Wall Street, with focus turning to key U.S. consumer price data due later Friday.

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Indexes in Japan, South Korea and mainland China showed modest increases, after US stocks ended the first quarter on a positive note. Investors are preparing to read the Fed's preferred consumer price reading for new clues about its policy outlook.

Many Asian markets, including Australia, Hong Kong and Singapore, are closed on Friday for a public holiday.

The gains in the region came after traders sent the S&P 500 to its 22nd record high this year on the back of data that showed the US economy remains healthy. A $4 trillion surge in the value of US stocks in just three months has stunned pessimists, while leaving a host of strategists scrambling to update their 2024 targets.

“Local events are driving gains in China, Japan and South Korea with investor sentiment supported by overnight gains in the US market,” said Seo Sang-yong, market strategist at Mirae Asset Securities. Portfolio rebalancing at the end of the quarter also appears to play a role, Seo added.

Traders are on alert for possible fluctuations in the Japanese currency after officials intensified their warnings this week to halt its decline. While the yen has since risen slightly against the dollar, it remains close to levels not seen in decades.

Japanese Finance Minister Shunichi Suzuki said on Friday that some of the yen's recent weak movements were merely speculative and did not reflect fundamentals, adding that there was no specific line of defense regarding the exchange rate level.

There is a growing sense of wariness about intervention, said Taishi Fujita, associate in the Americas global markets division at MUFG Bank. “Even if you build a position to sell the yen during a strong phase, you will likely drop the position when it approaches 152.” He noted that the market may continue to move in the low range of 151 yen to the dollar.

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The latest data showed that consumer price growth in Tokyo moderated while remaining well above the central bank's inflation target. This may keep the authorities on track to consider further interest rate hikes after they raised them earlier this month for the first time since 2007.

On the Chinese corporate front, one of the country's largest real estate companies postponed its earnings report while another recorded a historic decline in profits. Country Garden Holdings announced late Thursday that it would not meet a deadline for reporting annual results, saying it needed more information. Chinese developer Vanke said its net profits fell by 46% last year.

No rush

Swaps traders on Thursday slightly trimmed bets that the Federal Reserve will cut interest rates as soon as June following comments by Fed Governor Christopher Waller on Wednesday that there is no rush to cut interest rates. Two-year Treasury yields rose five basis points to 4.62% in a brief session before the holiday, while the dollar continued its quarterly advance. Cash treasury trading in Asia was closed for the holiday.

The two main measures of US government activity – gross domestic product and consumer spending – registered strong progress at the end of last year. Consumer sentiment rose significantly towards the end of March, supported in part by strong gains in the stock market.

In addition to the release of the Personal Consumption Expenditures price index, the Fed's preferred measure of inflation, traders will also be closely watching Fed Chairman Jerome Powell's speech later on Friday.

Elsewhere, gold hit a new all-time high, continuing a weeks-long rally fueled by bets on Federal interest rate cuts and worsening geopolitical tensions. Oil posted a 16% quarterly gain in the latest sign that export restrictions imposed by OPEC and its allies are curbing global supplies.

Bitcoin fell on Friday after rising to $71,555 in the previous session. Meanwhile, FTX co-founder Sam Bankman-Fried was sentenced to 25 years in prison for stealing billions of dollars from clients.

Main events this week:

• Good Friday. Stock exchanges in the United States and many other countries were closed for the holiday. The US federal government is open

• US Personal Income and Expenditure, Personal Consumption Expenditure Deflator, Friday

• San Francisco Federal Reserve Bank President Mary Daly speaks Friday

• Federal Reserve Chairman Jerome Powell speaks on Friday

Some key movements in the markets:

Stores

Currencies

• The Bloomberg Dollar Spot Index rose 0.1%.

• The euro fell 0.1 percent to $1.0776

• There was little change in the Japanese yen at 151.30 to the dollar

• There was little change in the yuan in external transactions at 7.2581 to the dollar

Digital currencies

• Bitcoin fell 0.3% to $70,522.93

• Ethereum rose 0.5% to $3,579

This story was produced with assistance from Bloomberg Automation.

-With assistance from Yukyung Lee, Daisuke Sakai, and Ravel Shirodkar.

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