Stocks rise as attention turns to US inflation

Tuesday saw gains in Asian shares driven by Chinese tech companies, but investors' primary attention was on important U.S. inflation data. The Nikkei was also negatively impacted by concerns that the Bank of Japan may be prepared to end its ultra-easy policies as soon as next week.

As traders watched the U.S. consumer price index later in the day to see when the Federal Reserve would probably begin its rate-cutting cycle, gold hovered slightly below its record top and the dollar remained stable.

The BOJ's decision to forgo buying Japanese exchange-traded funds on Monday, despite a severe decline in local equities, put Japan squarely in the focus throughout Asian hours, fueling speculation that a move away from the ultra-loose monetary policy was imminent.

According to four people familiar with the BOJ's thinking who spoke to Reuters last week, more and more officials are beginning to embrace the concept of eliminating negative interest rates this month.

The yen has strengthened during the previous week as a result of the shifting expectations, and the Nikkei has surpassed the record height reached last week.

Investor attention will shift to U.S. inflation data, which is anticipated to rise by 3.1% annually and 0.4% monthly when it is released later on Tuesday. The forecast increase in core consumer prices is 0.3%, which would cause the annual rate to drop to 3.7%.

According to the CME FedWatch Tool, the market has priced in more than a 70% possibility of a rate decrease in June, although it is almost clear that the US central bank will not lower rates when it meets next week. This year, traders are factoring in 90 basis points of reductions.

Over in the UK, the latest data released by the Office for National Statistics showed that the unemployment rate in the United Kingdom surged to 3.9% in the three months leading up to January, which is a surprising increase from the forecast 3.8% rate.

The average weekly wages for the time were 5.6% more than they were a year before, however, they were less than anticipated from 5.8% a month earlier. The consensus estimate was 5.7%.

Pay was up 6.1%, excluding bonuses, compared to the predicted 6.2% increase.

Compared to the previous three months, employment levels decreased by 21,000 during the three months, despite projections indicating a little gain.

(Sources: investing.com, reuters.com)