The ASX is tipped to get off to a strong start this morning after US markets hit fresh all-time highs overnight on news that inflation cooled more than expected in April.
The US consumer price index (CPI) rose 0.3% in April, against expectations of a 0.4% rise. On an annual basis, the growth rate fell from 3.5% to 3.4% — in line with estimates. The core CPI, which excluded food and energy, lifted 0.3% in April and annual core inflation slid from 3.8% to 3.6% for its slowest pace in three years.
The positive inflation data supports hopes for a Federal Reserve rate cut, sent all three major US benchmarks to new records, while bond yields dropped sharply on the news.
The National Australia Bank said, “US CPI was in line with expectations, but came as a relief for markets after a string of upside surprises.
“Pricing for a September start to Fed easing firmed, the US dollar showed broad-based declines, and equities rose to fresh all-time highs.”
What happened overnight?
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US markets
US sharemarkets hit all-time highs on Wednesday as bond yields fell after an inflation slowdown reinforced bets the US Federal Reserve will cut interest rates as early as September.
Retail sales were unexpectedly flat in April, indicating consumer spending was losing some momentum. Nvidia led a rally in chipmakers, jumping 3.6%. Data centre server company Super Micro Computer soared 15.8%.
Technology titans Apple (NASDAQ:AAPL) and Microsoft (NASDAQ:MSFT) rose between 1.2% and 1.8%. Dell Technologies rallied 11.2% after Morgan Stanley (NYSE:MS) raised its price target on the stock. The firm cited increasing momentum among enterprise clients, including for artificial intelligence server demand.
All three indexes closed at record highs:
- The Dow Jones index rose by 350 points or 0.9%;
- The S&P 500 index gained 1.2%; and
- The Nasdaq index added 231 points or 1.4%.
US government bond yields fell to more than five-week lows on Wednesday after data showed US consumer price inflation cooled in April, boosting expectations that the US Federal Reserve will cut interest rates two times this year. The US 10-year Treasury yield fell 10 points to 4.34% and the US 2-year Treasury yield dipped 9 points to 4.73%.
European markets
European sharemarkets climbed on Wednesday, with the main share index notching a record high, after data showed US consumer prices increased less-than-expected in April.
Rate-sensitive real estate stocks jumped 3.6%, with technology shares 1.1% higher. Commerzbank (ETR:CBKG) climbed 5.1% after the lender reported its strongest quarterly profit in a decade. The eurozone economy grew by 0.3% in the first quarter (survey: +0.3%).
- The continent-wide FTSEurofirst 300 index rose 0.6%.
- In London, the UK FTSE 100 index gained 0.2%.
Currencies
Currencies were stronger against the US dollar in European and US trade.
- The Euro rose from US$1.0821 to US$1.0885 and was near US$1.0880 at the US close.
- The Aussie dollar lifted from US66.28 cents to US66.94 cents and was near US66.90 cents at the US close.
- The Japanese yen jumped from 156.39 yen per US dollar to JPY154.68 and was near JPY154.85 at the US close.
Commodities
Global oil prices rose on Wednesday. The US Energy Information Administration (EIA) said energy firms pulled a more-than-expected 2.5 million barrels of crude from stockpiles last week. That compares with the 0.5-million barrel withdrawal analysts forecast.
- The Brent crude price rose US37 cents or 0.4% to US$82.75 a barrel.
- The US Nymex crude price gained US61 cents or 0.8% to US$78.63 a barrel.
Base metal prices climbed on Wednesday.
- Copper futures gained 0.3%, aided by a weaker US dollar and bullish demand outlook.
- Aluminium futures advanced 1.7%.
The gold futures price rose US$35 or 1.5% to US$2,394.90 an ounce on Wednesday, supported by a weaker US dollar and lower US Treasury yields. Spot gold was trading near US$2,385 an ounce at the US close.
Iron ore futures slid US35 cents or 0.3% to US$116.30 a tonne, dragged down by expectations of falling demand in China and US tariff hikes on Chinese products.
What’s on?
In Australia, employment data is scheduled. Reserve Bank (RBA) Assistant Governor (Economic) Sarah Hunter delivers a speech. Aristocrat Leisure, GrainCorp and Incitec Pivot release earnings. Atlas Arteria hosts an AGM.
In the US, jobless claims, industrial production, housing starts and building permits data are all released. Import and export prices are also issued with the Philadelphia Fed manufacturing index. Walmart (NYSE:WMT), Applied Materials (NASDAQ:AMAT), Baidu (NASDAQ:BIDU), JD.com, John Deere, TakeTwo Interactive and Under Armour all release earnings.
On the small cap front
The S&P ASX Small Ordinaries ended 0.01% lower yesterday, while the ASX200 gained 0.35%.
You can read more about the following throughout the day.