SINGAPORE: Asian stocks rose on Thursday ahead of U.S. inflation data that could influence the Federal Reserve's thinking on rate cuts, while the crypto world got a boost after exchange-traded funds (ETFs) to track bitcoin were approved in the United States.
MSCI's broadest index of Asia-Pacific shares outside Japan was 0.8% higher, on course to snap its seven-day losing streak.
Japan's Nikkei breached 35,000 for the first time since February 1990 in a blistering start to the year, after rising 28% in 2023, its strongest yearly performance in a decade. The Nikkei was last up 1.9% at 35,085 on Thursday.
The exuberant mood is likely to continue in Europe, where Eurostoxx 50 futures were up 0.65%, German DAX futures advanced 0.56% and FTSE futures climbed 0.31%.
E-mini futures for the S&P 500 tacked on 0.18%.
Market attention has zeroed in on the U.S. consumer price index report (CPI) due later on Thursday. Core CPI is forecast to remain unchanged at 0.3% from the month before, while year-on-year inflation is expected to slow to 3.8% from November's 4%, a Reuters poll showed.
"The risk is that markets sell off on a strong print," said Ben Bennett, APAC investment strategist for Legal and General Investment Management (LGIM). "The reaction could be more muted if we get a soft number."
Since the start of the year investors have been rethinking just how sharply and early the Fed will cut rates. Fed futures prices indicate traders anticipate 140 basis points of easing this year, compared with 160 bps of cuts expected at the end of 2023.
Still, it is higher compared to the Fed's projection of 75 bps of cuts in the year. Markets are pricing in a 69% chance of a rate cut as soon as in March, the CME FedWatch tool showed.
Federal Reserve Bank of New York President John Williams said on Wednesday it is too soon to call for rate cuts as the central bank still has some distance to go on getting inflation back to its 2% target.
LGIM's Bennett said that investors are underestimating the risk of a U.S. recession. "Soft CPI prints could eventually become a sign of disappointing demand. But that's probably still a while away."
Investor focus will also be on the earnings season, with banking giants JPMorgan Chase, Bank of America, Citigroup and Wells Fargo all due to report earnings on Friday.
China stocks staged a small recovery as investors bought into the dip, with sentiment cautious around the stuttering economy. The blue-chip CSI 300 Index rose 0.75%, while Hong Kong's Hang Seng Index was 2% higher, on course to snap its seven-day losing streak.
"There's a lot of uncertainty hanging around China," said Shane Oliver, head of investment strategy and chief economist at AMP Capital, noting that the fiscal stimulus from China has been fairly modest so far.
"I think global investors would probably feel far more cheerful about China if there was more focus on boosting consumer spending."
BITCOIN ETFs
The U.S. securities regulator late on Wednesday approved the first U.S.-listed ETFs to track bitcoin, in a watershed for the world's largest cryptocurrency, with most of the products expected to begin trading on Thursday.
Crypto-services firm Nexo co-founder Antoni Trenchev said the spot ETF news is possibly bitcoin's biggest since its launch but the approval shouldn't be viewed in isolation, given the timing of the upcoming halving in April which cuts the bitcoin supply and historically kick-starts the new bull market.
"Both these events combined could well send bitcoin to $100,000 in 2024."
On Thursday, bitcoin was little changed and a shade above $46,000, having surged more than 70% since October in anticipation of the decision from the regulator.
In the currency market, the Japanese yen recouped some of its losses and was last at 145.43 per dollar, having dropped 0.9% overnight. Data on Wednesday showed Japanese workers' real wages shrank for a 20th straight month in November - confounding officials' wishes to see wage gains before tightening policy.
The dollar was on the back foot ahead of the U.S. inflation report. The soft dollar helped gold prices, with spot gold up 0.5% at $2,033.92 an ounce.
U.S. crude rose 0.71% to $71.88 per barrel and Brent was at $77.36, up 0.73% on the day, after dropping nearly a dollar in the previous session as a surprise jump in U.S. crude stockpiles raised worries about demand in the largest oil market. - Reuters
