SYDNEY, Feb 14 — Asian shares tracked the bounce on Wall Street today, as investors remained sanguine that key US economic data due later would show an easing in inflation, while the yen recouped losses ahead of the nomination of a new central bank governor.
Japan’s currency had weakened on uncertainty surrounding Kazuo Ueda’s probable appointment as the next governor of the Bank of Japan, a surprise choice that could improve the odds of an end to its unpopular yield control policy.
MSCI’s broadest index of Asia-Pacific shares outside Japan rebounded 0.4 per cent. Japan’s Nikkei rose 0.6 per cent.
Chinese blue chips climbed 0.2 per cent, while Hong Kong’s Hang Seng Index rose 0.4 per cent.
In some positive news for geopolitics, US Secretary of State Antony Blinken is considering meeting top Chinese diplomat Wang Yi at the Munich Security Conference this week, after the United States shot down what it said was a Chinese spy balloon and other flying objects.
Later today, the US Bureau of Labour Statistics will release January’s Consumer Price Index (CPI) data, which is expected to show how effective Federal Reserve policy tightening has been in taming inflation.
Analysts expect headline CPI to rise 0.5 per cent in January, with the core number seen advancing to 0.4 per cent from 0.3 per cent the previous month, according to a Reuters poll. On an annual basis, CPI likely eased to 6.2 per cent, from 6.5 per cent in December.
Overnight on Wall Street, the S&P 500 rose 1.2 per cent, while the Nasdaq rallied 1.5 per cent and Dow Jones was up 1.1 per cent.
“The bottom line for us is two-fold. First, inflation is coming down, but it will not be a smooth decline. A return to target for inflation was never very likely this year, so patience is required regardless,” said Seth Carpenter, chief global economist at Morgan Stanley.
“But second, the recent high wage inflation does not spell failure for the Fed. Services inflation is not too far off target, the link from wages to inflation is there, but small, and both services wage and price inflation are trending down despite a strong labour market,” Carpenter added.
Treasuries rallied a little, with the yield on the benchmark 10-year government bonds easing 2 basis points to 3.6940 per cent.
The two-year bond yields also eased from their three-month highs to hover at 4.5090 per cent, compared with the previous close of 4.5340 per cent.
In the currency markets, the dollar remained subdued ahead of the inflation data, after suffering a 0.3 per cent loss against its major peers last session.
It weakened 0.2 per cent against the Japanese yen to 132.13 yen, after gaining 0.8 per cent the previous day.
Today, the Japanese government is expected to name academic Kazuo Ueda as its pick to become next central bank governor.
Japan’s 10-year bond yields hovered at 0.5 per cent — hitting the upper limit of the range — as investors bet the yield control policy would wound up eventually under the new governor.
BlackRock Investment Institute on Monday cut Japanese stocks to “underweight”, saying that a Bank of Japan (BOJ) policy change away from its “ultra-loose” monetary strategy could push global yields higher and reduce risk appetite.
In the oil market, Brent crude futures eased 0.7 per cent to US$85.99 while US West Texas Intermediate (WTI) crude also fell 1 per cent to US$79.2.
Gold was slightly higher. Spot gold traded at US$1,855.59 per ounce. — Reuters
