Asian stock markets experienced gains as traders responded positively to softer US inflation data, with Indonesian stocks leading the surge. However, the South Korean won faced a dip. Easing inflation in the US is sending positive vibes across Asian markets. The US PCE price index, a key measure of inflation for the Federal Reserve, rose by just 2.6% over the year to May, slightly down from 2.7% in April. This decline suggests cooling inflationary pressures, potentially nudging the Fed closer to rate cuts. According to the CME FedWatch tool, traders are now betting on at least two cuts this year, with a 63% chance of a September cut.
Southeast Asian equities saw modest gains, while the Malaysian ringgit, Singaporean dollar, and Thai baht remained stable. In contrast, the South Korean won slipped 0.4%, struggling with slower-than-expected export growth driven by chip demand. Investors are buoyed by the US inflation data, and this optimism is spreading to Asian markets. Modest gains in Malaysian, Taiwanese, and Philippine stocks, along with stable Southeast Asian currencies, point to cautious optimism. Indonesian stocks were the standout performer, surging 0.8% thanks to the country’s lowest inflation rate in nine months.
China’s cooling manufacturing and services activity suggests a tepid economic recovery, increasing the likelihood of further stimulus measures. Meanwhile, Japanese economic revisions and a weak yen are putting pressure on regional currencies. Asian markets will closely watch upcoming inflation data from Thailand, the Philippines, Taiwan, and South Korea to gauge broader economic trends.
The recent US inflation data has sparked optimism in Asian markets, with Indonesian stocks making significant gains. However, challenges remain, particularly for the South Korean won. As global economic trends continue to shape local markets, upcoming data releases will be crucial in determining future movements.
Fidelity Asian Values Plc (LON:FAS) provides shareholders with a differentiated equity exposure to Asian Markets. Asia is the world’s fastest-growing economic region and the trust looks to capitalise on this by finding good businesses, run by good people and buying them at a good price.
