FX.co ★ Asian Shares Mostly Higher As US Inflation Cools

Asian stocks experienced broad gains on Thursday, buoyed by soft U.S. inflation data, which kept hopes alive for a potential Federal Reserve rate cut in September.

Chinese and Japanese markets, however, ended the session lower. This came after the European Union threatened to impose provisional tariffs on Chinese electric vehicle imports starting in July.

The U.S. dollar index gained momentum, which pressured gold prices. Meanwhile, oil prices fell due to a surprising increase in U.S. inventories and an International Energy Agency (IEA) forecast predicting a surplus petroleum production of up to eight million barrels per day by 2030.

China's Shanghai Composite Index decreased by 0.28%, closing at 3,028.92 points. This drop followed increased U.S. scrutiny of Chinese imports and deteriorating trade relations between the two nations.

In contrast, Hong Kong's Hang Seng Index surged by 0.97% to finish at 18,112.63 points, driven by optimism over artificial intelligence's potential positive impact on businesses.

Japanese markets closed lower as investors prepared for Friday’s Bank of Japan (BOJ) policy meeting, where the central bank might consider reducing its bond purchases—a preliminary move towards scaling back its nearly $5 trillion balance sheet. The Nikkei average slipped by 0.40%, ending at 38,720.47 points, while the broader Topix Index settled 0.89% lower at 2,731.78, giving up earlier gains. Automakers Honda Motor, Nissan, and Toyota saw declines of between 1.4% and 2.5% due to Europe's plan to increase tariffs on Chinese-made electric vehicles, coupled with Beijing's hints at countermeasures.

On a positive note, chip-testing equipment manufacturer Advantest advanced by 1.5%, tracking gains in the U.S. semiconductor index from the previous night. However, Tokyo Electron and Screen Holdings faced declines of 1.7% and 2.3%, respectively.

In South Korea, stocks moved upward, with the Kospi average rising by 0.98% to 2,754.89, marking its third consecutive session of gains. Tech stocks were particularly strong, with Samsung Electronics rallying by 2.8% and SK Hynix increasing by 3.3%.

Australian markets ended higher after paring some early gains due to May employment figures exceeding forecasts, causing concerns about the Reserve Bank of Australia's (RBA) future rate path. The S&P/ASX 200 rose by 0.44% to 7,749.70, snapping a two-day losing streak led by tech stocks and real estate investment trusts. The broader All Ordinaries Index closed up by 0.49% at 8,002.50. Market operator ASX tumbled by 8% following a forecast of increased technology expenditure. Moreover, bookseller Booktopia halted trading on its stock in anticipation of a significant announcement resulting from a strategic review.

Across the Tasman in New Zealand, the S&P/NZX 50 Index rallied by 1.11% to 11,872.64 on optimism spurred by declining U.S. inflation.

In the U.S., stocks finished mostly higher overnight as decreasing inflation bolstered expectations that the Fed might lower interest rates in the coming months. U.S. consumer prices rose by 3.3% in the year ending in May, a slight decrease of 0.1 percentage points from the previous month. Core prices grew at their slowest annual pace in over three years, even as rents continued to strain household budgets.

Federal Reserve Chair Jerome Powell acknowledged that inflation has significantly eased in recent months but remains too high. The Fed's latest projections indicated expectations for only one interest rate cut this year, down from three in the previous forecast in March. The dot plot showed that more participants expect two rate cuts rather than one, with none anticipating more than two cuts this year. Four participants do not expect any cuts.

The tech-heavy Nasdaq Composite surged by 1.5%, and the S&P 500 rose by 0.9% to new record closing highs, while the Dow ended marginally lower, surrendering early gains.