Asian equities rise on tech growth while investors consider the US interest rate future

Chip stocks propelled Asian shares higher on Thursday, with the Nikkei breaking a record 34-year high. Meanwhile, the dollar depreciated close to a three-month high as investors speculated about when the Federal Reserve would likely begin its easing cycle.

European markets are poised for a solid start, as German DAX futures are up 0.39% and FTSE futures are up 0.6%.

The persistence of inflation, as seen by statistics this week, has put the U.S. economy and labour market under pressure, undermining investor expectations of an early and significant interest rate decrease by the Fed.

Tuesday's data revealed that while rental housing expenses increased, consumer prices increased more than anticipated.

The CME FedWatch tool indicated that traders are now pricing in an 82% likelihood of a cut in June, further delaying the beginning of the U.S. central bank's easing cycle. By the end of 2023, rate decreases as early as March had been priced in by the markets.

Investors now expect the year's rate of reduction to be 97 basis points, which is closer to the 75 basis points the Fed had factored in.

The Fed's journey back to its 2% inflation target rate, according to Chicago Fed President Austan Goolsbee, will continue on course even if price rises prove to be somewhat more rapid than anticipated in the coming months.

Goolsbee advised the central bank to exercise caution when deciding whether to lower interest rates.

In the UK, dealers are factoring in 70 basis points of interest rate reductions from the Bank of England this year; the first decrease is expected in June.

The UK reported its GDP data earlier, which highlighted that its economy entered a recession in the last 3 months of 2023 as it shrank 0.3%.

More key data is due from the US later in the day, with retail sales and initial jobless claims expected at 13:30 GMT.

(Sources: investing.com, reuters.com)