Asian equities climb ahead of US CPI

After a brutal start to 2024, most Asian equities gained on Thursday. Investors were mostly awaiting important U.S. inflation data for more indications about potential interest rate reductions. Japan's Nikkei 225 index continued its remarkable upward trend, having reached multi-decade highs this week.

Wall Street, which closed higher on Wednesday due to gains in heavyweight technology firms, provided a favourable lead-in for regional markets. Asia saw a spillover of this trend, with tech-heavy markets seeing the biggest increases.

With a 2% increase on Thursday, the Nikkei 225 in Japan continued to outperform its Asian counterparts, reaching a new 34-year high above 35,000 points. Though the heavy lifting was done by technology and auto firms, the index was helped by broad-based advances.

Expectations that the Bank of Japan will stick to its ultra-dovish policy in the foreseeable future, particularly in light of stimulus measures following a terrible earthquake in central Japan, have been the major driver of recent increases in Japanese equities.

With a 30% yearly increase, the Nikkei was among the top-performing global market indices in 2023 thanks in part to a dovish BOJ.

Positive December sales data from TSMC, which raised some expectations for an AI-driven rebound in chip demand, also helped to boost tech sentiment. In Taiwan trade, the stock increased by 0.3%.

However, further gains were restrained in the majority of Asian markets as traders braced themselves for the release of important U.S. consumer price index (CPI) data later in the day.

While the core CPI is predicted to fall, the headline inflation estimate is predicted to show a little increase.

Given that inflation is predicted to stay considerably over the central bank's 2% annual objective, traders questioned if the figure will persuade the Fed to drop interest rates sooner.

(Sources: investing.com, reuters.com)