Key facts
- US inflation data and July nonfarm payrolls have reduced expectations for a September Federal Reserve rate hike.
- Japanese wholesale inflation data suggests continued price pressures, reinforcing expectations for a Bank of Japan rate hike.
- Asian and European stock futures showed gains, while oil prices declined.
- The US budget deficit reached a record $432 billion in July.
- Norway's sovereign wealth fund reported record profits in the first half of the year.
U.S. stock indices, including the Nasdaq and S&P 500, neared all-time highs, buoyed by positive tech earnings and U.S. inflation data that suggests the Federal Reserve may hold off on further interest rate hikes next month. The July inflation figures, released on Wednesday, aligned with expectations and, combined with a recent soft employment report, have shifted market sentiment towards a pause in rate increases.
In contrast, Japanese wholesale inflation data for July showed a 7.2% year-on-year rise, reinforcing expectations for a September rate hike by the Bank of Japan. This price pressure is partly attributed to strong demand from the AI boom and higher raw-material costs stemming from the Middle East war.
Asian stocks were mostly firm, with South Korean shares hitting their highest levels in three weeks, driven by chip stocks. MSCI's broadest index of Asia-Pacific shares outside Japan was up nearly 1%, while Japan's Nikkei rose 1.61% as of the midday recess. In early European trades, the pan-region Euro Stoxx 50 futures rose 0.35%, German DAX futures were up 0.26% and FTSE futures edged 0.27% higher.
Oil prices fell after forecasters scaled back this year's global demand outlook, citing the broader fallout from the Middle East war. U.S. crude shed 1.3% to $82.19 a barrel and Brent eased to $87.95 per barrel, down 1.16%. The United States and Iran remained deadlocked over efforts to end the conflict, with conflicting claims about control over the vital Strait of Hormuz.
In Sydney, Reserve Bank of Australia Assistant Governor Christopher Kent warned of the risk of further policy tightening, stating that inflation threats remain on the upside and "a lot of things" would need to go right to avert another rate hike.
The U.S. budget deficit reached a record $432 billion in July, contributing to concerns about fiscal sustainability. Norway's sovereign wealth fund, the world's largest, achieved record profits in the first half of the year, managing assets totaling $2.3 trillion.