Japan, Taiwan shares set records on tech boost, Fed cut hope

SYDNEY: Japanese and Taiwanese shares set records on Thursday as technology companies rallied while investors wagered that US inflation data will be well behaved enough to ensure an interest rate cut next week, and perhaps two more by year end.

Before then, the European Central Bank is widely expected to hold rates steady later in the day but a fraught trade and political outlook means it will likely keep alive the prospect of further easing.

Meanwhile, oil prices held gains after Poland downed suspected Russian drones in its airspace and as the US pushed the EU to impose new sanctions on buyers of Russian oil.

Gold climbed near all-time highs.

Japan’s Nikkei gained 0.8% to hit a record as tech and energy firms as well as utilities jumped.

Taiwanese shares rose 1% to also set a record as leading chipmaker TSMC gained 2.5%. SoftBank rose almost 9% after Stargate Project partner Oracle soared 36% on Wall Street overnight in the biggest one-day percentage gain since 1992 as it forecast a demand surge from AI firms for its cloud computing services.

Nasdaq futures rose 0.2% and S&P 500 futures inched up 0.1%.

MSCI’s broadest index of Asia-Pacific shares outside Japan was off 0.1% due in part to drag from Hong Kong where the Hang Seng index was down 0.9%.

Overnight, a benign reading on US producer prices led markets to price in more chance of three interest rate cuts from the Federal Reserve this year.

Investors have fully priced in a quarter-point move from the Fed at next week’s meeting, with an 8% chance of a 50 basis-point cut.

With PPI out of the way, investors are now focused on the consumer prices index for August due out later in the day.

Asia stocks gain, bonds fall as traders judge odds of bigger Fed cut

A Reuters poll showed the headline CPI likely rose 2.9% from a year earlier, the biggest increase since January, while the core measure likely held at 3.1%.

“Unless CPI delivers a significant upside shock, investors are likely to maintain their dovish outlook,” said Julien Lafargue, chief market strategist at Barclays Private Bank.

“This shift in inflation dynamics could prove pivotal for the US Fed, which now faces fewer constraints in pursuing a more aggressive rate-cutting cycle.

With inflation appearing less of a threat, the Fed may find room to stimulate the economy more assertively.“ In foreign exchange, movement was muted with the US dollar struggling for direction.

The dollar index was last flat at 97.81, a touch above a seven-week trough of 97.25.

The Australian dollar hit a 10-month top of $0.6636 overnight before steadying at $0.6616 on Thursday.

In the bond market, 10-year Treasury yields edged up 2 basis points to 4.0531%, having fallen 4 bps overnight as a solid 10-year note auction alleviated some concern about investor appetite for long-term US debt.

An even more telling gauge will be the Treasury’s $22 billion sale of 30-year bonds on Thursday.

The 30-year yield rose 2 bps to 4.7028%, having come down more than 30 basis points since it briefly topped 5% a week ago.

In commodity markets, oil prices held gains, having settled up over 1%.

US crude was flat at $63.65 a barrel, while Brent was little changed at $67.49. Spot gold prices gained 0.1% to $3,644 an ounce.