Asian stock markets rose on Thursday (July 11th), with global tech stocks rising yesterday to drive the stock market to new highs. Today's US CPI inflation data will be released.
The stock markets in Japan, Australia, and China rose following Wall Street's strong performance on Wednesday. The Australian dollar, the New Zealand dollar, and most Asian currencies rose against the US dollar.
Taiwan Semiconductor's stock price reached a new high after sales growth in the second quarter increased at the fastest rate since 2022. As the only supplier of advanced chips for Nvidia and Apple, Taiwan Semiconductor's performance is impressive. Sony, Tencent, and SK Hynix, the South Korean chip manufacturer (since 2000, its share price has reached the highest level), are the main contributors to the rise in regional stock index. #Asian Market Live#
The S&P 500 index and the Nasdaq 100 index both rose more than 1%, and the global stock market index also hit a new high, thanks to the performance of companies such as Nvidia and Apple. Apple said it plans to increase its shipments by 10% after a bumpy year in 2023. The S&P 500 index has risen for seven consecutive trading days, the longest winning streak since November.
"Despite a lot of data this week, including Fed Chairman Powell's testimony, CPI/PPI reports, and the start of earnings season, the market is still very calm," said Mark Hackett of Nationwide.
The US CPI is absolutely heavyweight.
The core CPI (excluding food and energy costs), which is considered a better indicator of potential inflation, is expected to rise 0.2% in June, up for the second consecutive month. This would mark the smallest consecutive increase since August, a rate that is more acceptable to Fed officials.
"June's CPI report looks like another 'very good' report and should boost the Federal Open Market Committee's confidence in the trajectory of inflation," Anna Wong, a Bloomberg economist, said. "This will set the stage for the Fed to cut rates in September."
Meanwhile, as Wall Street prepares for the Consumer Price Index, Fed Chairman Powell told Congress that the Fed does not need to lower inflation to below 2% before lowering interest rates, and that officials still have more work to do. He noted that the labor market has "significantly cooled." Powell mentioned that there is still a "long way to go" for balance sheet reduction and that commercial real estate will not threaten financial stability.
"The key conclusion from his testimony is that the Fed's assessment of the risk balance is shifting, and if supported by the forthcoming data, the Fed will cut rates in September," says Krishna Guha of Evercore ISI.
Swap pricing shows that there are expectations of two Fed interest rate cuts in 2024, with the first cut possibly in September.
"The timing of an interest rate cut is still an "open question," prompting traders to reduce their bets on an interest rate cut in August, said Huw Pill, chief economist at the Bank of England.
In Asia, investors will be watching for any impact on short selling and high-frequency trading rules as the China Securities Regulatory Commission tightens the rules to combat unfair arbitrage and maintain market stability.
China has introduced new measures.
China's securities regulator announced a heavy short-selling restriction and promised to strengthen scrutiny of computerized program trading on Wednesday (July 10th). Reuters UK said this is China's latest effort to boost ailing stock markets.
The China Securities Regulatory Commission (CSRC) said it will suspend margin trading and securities lending (brokers lend stocks to customers to short sell). In addition, the margin requirement for short sellers will be increased. The China Securities Regulatory Commission also urged stock exchanges to release detailed rules to regulate program trading, especially high-frequency trading.
As China's Third Plenary Session is set to begin next week, market sentiment towards Chinese stocks has also deteriorated.
Since mid-May, A-shares have continued to decline due to the resurgence of trade tensions, the ongoing real estate crisis, and the thriftier consumer base, with dim growth prospects. Although the benchmark index is still higher than the level during the plunge in February, some indicators show that the market sentiment is almost as bad as it was then.
Expectations are low that next week's Third Plenum will solve these issues. This once-in-five-years meeting will discuss broader economic policies and long-term reform agendas, rather than stop-gap measures for a sluggish market.
According to Bloomberg economists, China does have the ability to end its housing crisis with a "big bang" solution, but the likelihood of taking action is low.
"Investors' consensus is that the policies enacted at the meeting will not have enough strong force to reverse market sentiment," said Yang Tingwu, a partner at Fujian Tongheng Investment Ltd. "On the other hand, this also means that no matter what the plenum brings, there won't be too much disappointment."
In addition, the Bank of Korea on Thursday kept its benchmark rate unchanged, seeking more evidence of sustained inflation cooling. Thursday's economic reports in Asia include Thailand's consumer confidence index and Malaysia's monetary policy decision. China's money supply and new loan data may be released as early as Thursday.
In terms of bulk commodities, oil prices rose for the second consecutive day as signs of demand growth and increased risk sentiment in the broader market. Gold rose for the third consecutive day.