(Updates prices at 0625 GMT, analyst comment in paragraphs 9-10, data details 14-15)
By Ankur Banerjee
SINGAPORE, Feb 15 (Reuters) – Asian equities rose on Thursday, powered by chip stocks, with the Nikkei breaching a new 34-year peak, while the dollar took a breather near a three-month high as markets assess when the Federal Reserve is likely to start its easing cycle.
MSCI’s broadest index of Asia-Pacific shares outside Japan rose 0.7%, with the IT index surging nearly 3%. Taiwan stocks soared to a record high, with chipmaker TSMC up nearly 8%.
Japan’s Nikkei closed 1.2% higher, climbing as high as 38,188.74 during the session, its firmest since January 1990, inching closer towards its record high last seen in December 1989.
European bourses look set for a strong open, with Eurostoxx 50 futures up 0.40%, German DAX futures up 0.29% and FTSE futures 0.35% higher.
Investor expectations of early and deep interest rate cuts by the Fed have been besieged by a slew of data that has underscored the resiliency of the U.S. economy and labour market, with data this week showing persistent inflation.
Data on Tuesday showed consumer prices rose more than expected as rental housing costs jumped.
Traders are now pricing in an 82% chance of a cut in June, the CME FedWatch tool showed, further pushing back the starting point of the U.S. central bank’s easing cycle. Markets at the end of 2023 had priced in rate cuts starting as early as March.
Investors now anticipate 97 basis points of cuts in the year, closer to the 75 bps the Fed had forecast in December.
Central bankers everywhere will be a little less keen on cutting rates if the Fed has to delay its move, said Ben Bennett, APAC investment strategist at Legal And General Investment Management.
“But it’s only one inflation print, and we all know how hard it is to forecast inflation, so the market impact is probably relatively small unless we get a second high print in a row.”
Chicago Fed President Austan Goolsbee said on Wednesday said the Fed’s path back to its 2% inflation target rate would still be on track even if price increases run a bit hotter-than-expected over the next few months.
The central bank should be wary of waiting too long before it cuts interest rates, Goolsbee said
That sent Treasury yields lower, with the yield on 10-year Treasury notes slipping 3.1 basis points to 4.236% in Asian hours.
Investor focus during European hours will be on a swathe of data, with the UK GDP and trade figures taking the spotlight in the wake of British inflation unexpectedly holding steady in January, defying forecasts of a rise.
Traders are pricing in 70 bps of cuts from the Bank of England this year, with the first cut anticipated in June.
JAPAN GDP
Data on Thursday showed Japan’s economy slipped into recession as it unexpectedly shrank for a second straight quarter on weak domestic demand, raising doubts about the central bank’s plans to exit its ultra-easy policy this year.
The yen strengthened but traded near the psychologically important 150 per dollar level. The yen was last at 150.18 per dollar.
The 150 level on the pair has been seen in the past as a potential catalyst for intervention by Japanese monetary authorities. It was just past this level that led them to intervene to shore up the yen in late 2022.
On Wednesday, Wall Street ended sharply higher as ride-hailing platforms Lyft and Uber rallied, while Nvidia displaced Alphabet as the U.S. stock market’s third-most valuable company.
The dollar index, which measures the U.S. currency against six rivals, was at 104.66 near its three-month high of 104.97
U.S. crude fell 0.5% to $76.26 per barrel and Brent was at $81.24, down 0.44% on the day.
(Reporting by Ankur Banerjee; Editing by Jacqueline Wong)
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