Stocks rise, dollar drifts ahead of US inflation report
Asian stocks rose on Wednesday while the dollar drifted lower as traders weighed mixed U.S. producer price data and braced for the crucial consumer price report later in the day that is likely to influence the Federal Reserve's near-term policy path.
MSCI's broadest index of Asia-Pacific shares outside Japan rose 0.38%, scaling a fresh 15-month high earlier in the session. Japan's Nikkei gained 0.58%.
Data overnight showed U.S. producer prices increased more than expected in April, indicating that inflation remained stubbornly high early in the second quarter.
Fed Chair Jerome Powell, speaking at a banking event in Amsterdam, called the PPI data «mixed» rather than «hot» because prior data was revised lower.
Investors have had to dial back their expectations of U.S. rate cuts this year due to sticky inflation and are now pricing in 43 basis points of easing this year, compared with 150 bps of easing anticipated at the start of 2024.
«Market anticipation of rate cuts has been building recently based on weaker-than-expected U.S. labour market data, but if prices don't follow suit, then rate-cut hopes will be dashed,» said Ryan Brandham, head of global capital markets, North America at Validus Risk Management.
All eyes are now on Wednesday's U.S. consumer prices report, which is expected to show CPI rose 0.3% month-on-month in April, down from a 0.4% growth the previous month, according to a Reuters poll.
Powell reiterated his message of caution over rate cut expectations although the Fed chief, along with
