Asian shares rose after rising US inflation cleared the way for rate cuts

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Asian markets rose on Thursday after US inflation data paved the way for another rate cut by the Federal Reserve next week.

November inflation in the world’s largest economy reached 2.7 percent, more than the previous month but in line with market expectations, reinforcing expectations of a quarterly decline in December.

Equity markets in Asia led by Japan and China were boosted by gains in US stocks, and Asian currencies strengthened against the dollar as investors found lower prices.

Japan’s benchmark Nikkei 225 index closed down 1.2 percent, while China’s blue-chip CSI 300 index rose 1 percent to over 4,000 points. Hong Kong’s Hang Seng rose 1.6 percent.

China’s 10-year government yield fell nearly two quarters to 1.814 percent, widening the spread against the US 10-year yield to nearly 250 basis points. Bond yields move inversely with prices. The offshore renminbi was hovering at Rmb7.27 to the dollar.

“The movement in Asian markets has been strong and aggressive,” said Mitul Kotecha, head of emerging markets and strategic strategies at Barclays. “Strong performance in the US especially in technology stocks – Asian markets are reacting. The inflation numbers are very good – not too hot, not too cold and that’s good for the markets.”

The Nasdaq 100 closed up 1.9 percent and the tech-heavy Nasdaq Composite closed above 20,000 for the first time that US stocks have gained.

“In Japan, Korea and Taiwan, the rise of the US technology giant is boosting the semiconductor industry,” said Jason Lui, head of Asia-Pacific equities and derivatives strategy at BNP Paribas.

The dollar weakened 0.15 percent against a basket of currencies including the pound and the Japanese yen. It has grown since Donald Trump won the presidential election in November, driven by bets that he would bring in more tariffs and liberalize economic policy.

Analysts added that other factors contributed to the success of some Chinese products.

“For Hong Kong and China institutions, investors are becoming more optimistic about the results of the Central Economic Work Conference after the politburo’s encouraging speech,” said Lui.

The Politburo of the Communist Party, which is headed by Xi Jinping, changed the stance of the monetary policy Monday “slightly relaxed” on “intelligence” for the first time in 14 years.

Taiwan’s benchmark stock index rose 0.6%, while South Korea’s Kospi rose 1.1%.

Additional reports from Cheng Leng in Hong Kong