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Asian stocks follow Wall Street gains on cooling inflation

Bangkok: Stocks rose in Asia on Thursday after benchmarks closed at three-month highs on Wall Street as investors cheered a report showing inflation cooled more than expected in July.

Hong Kong, Shanghai and Seoul recorded gains of more than 1%. Tokyo was closed for vacation. US futures rose slightly as oil prices fell.

The government said on Wednesday consumer inflation jumped 8.5% in July from a year earlier. But that was down from June’s four-decade high of 9.1%.

The S&P 500 jumped 2.1% on expectations that slower inflation will mean the Federal Reserve may moderate its interest rate hikes.

Tech stocks, cryptocurrencies and other investments that were among the biggest losers of the year due to the Fed’s aggressive rate hikes led the way.

Hong Kong’s Hang Seng Index added 1.9% to 19,982.20 while the Shanghai Composite Index gained 1.2% to 3,268.02.

Seoul’s Kospi rose 1.3% to 2,513.22 and Taiwan’s Taiex rose 1.5%.

In Thailand, the SET rose 0.4% after the country’s central bank raised its benchmark interest rate by 0.25 percentage points to 0.75% a day earlier.

The Southeast Asian country’s economy has been hit hard by the pandemic, which has ravaged its all-important tourism sector.

On Wall Street, the S and P 500 gained 87.77 points to 4,210.24, hitting its highest levels since early May. It is now nearly 15% above its mid-June low.

The Nasdaq composite, whose many high-growth and expensive-looking stocks have been particularly vulnerable to interest rates, jumped 2.9% to 12,854.80. That’s up more than 20% from June.

The Dow Jones Industrial Average rose 1.6% to 33,309.51.

Tech stocks, cryptocurrencies and other hard-hit investments of the year were among the day’s biggest gainers. Bitcoin rose 2.2% to just under $24,000.

Lower gasoline and oil prices helped moderate inflation in July. But excluding that and food price volatility, so-called “underlying inflation” held steady last month, at 5.9%, instead of accelerating as economists had expected.

The data encouraged traders to reduce bets on how much the Fed will raise interest rates at its next meeting.

Interest rates help determine where prices go in financial markets and higher rates tend to lower prices for everything from stocks to commodities to crypto.

Further reports this week will show how inflation is doing and whether US households are further reducing their expectations for inflation ahead, an influential data point for Fed officials.

Bond prices shot up immediately after the inflation report was released, dragging bond yields down. The two-year Treasury yield, which tends to follow Fed expectations, fell to 3.19% from 3.27% on Tuesday evening.

The 10-year yield initially fell, but stabilized later in trade.

It rose slightly to 2.79% from 2.78% on Tuesday evening.

It remains below the two-year yield and many investors see such a gap as a fairly reliable signal of an upcoming recession.

Recession worries have been mounting as the highest inflation in 40 years weighs on households and businesses around the world.

Wall Street is watching closely whether the Fed can successfully rein in the economy and cool inflation without sliding into a recession.

The Federal Reserve will receive some highly anticipated reports ahead of its next interest rate announcement on September 21st.

They could also change his position. These include data on economy-wide hiring trends, due September 2, and the next update on consumer inflation, due September 13.

In other trading, the benchmark U.S. crude lost 15 cents to $91.78 a barrel in electronic trading on the New York Mercantile Exchange. It gained $1.43 to $91.93 on Wednesday.

Brent, the basis for international prices, fell 10 cents to $97.30.

The US dollar fell from 132.93 Japanese yen to 133.20 yen on Wednesday evening. The euro slipped to $1.0288 from $1.0300.