Asian shares rose, helped by the technology sector, while the dollar remained firm on Wednesday, ahead of a key U.S. inflation report and a Federal Reserve policy decision that will determine the near-term outlook for interest rates .
European markets are also expected to open slightly higher, with EUROSTOXX 50 futures rising 0.3% and FTSE futures gaining 0.4%. S&P 500 and Nasdaq futures rose 0.1% in Asia.
MSCI’s broadest index of Asia-Pacific shares outside Japan rose 0.3%, while Japan’s Nikkei slipped 0.5%. Technology shares in the region outperformed, with the MSCI Asia-Pacific ex-Japan IT index rising 1.8%.
Overnight on Wall Street, Apple soared 7% to a record high, a day after unveiling new AI features set to revive demand for iPhones. That helped the Nasdaq Composite rise 0.9% and the S&P 500 gain 0.3%, hitting all-time closing highs.
Shares in tech-heavy Taiwan and South Korea followed suit with gains of 1.3% and 0.4%, respectively. Chipmaker Taiwan Semiconductor Manufacturing Co jumped 3.2%.
Elsewhere, caution reigned, with still weak price data from China failing to lift sentiment much. Data showed on Wednesday that China’s consumer prices fell 0.1% in May from a month earlier, missing forecasts. On an annual basis, they increased by 0.3%.
China’s blue chips have swung between gains and losses and were last up 0.1%, while Hong Kong’s Hang Seng index fell 1.1%, weighed down by a 20% slump in China Evergrande New Energy Vehicle Group, after developer China Evergrande’s unit warned of losing business.
Attention now shifts to US CPI data, which is expected to rise a paltry 0.1% in May from the previous month, but with a core increase of 0.3%.
“The countdown is on, with the market in full risk management mode,” said Chris Weston, head of research at Pepperstone. “There isn’t much reason to come in and sustain the weakness at the opening, so we could easily see further selling at the open.”
“I like to use US core CPI m/m as a simple playbook guide, so any number around 0.2% m/m could provide relief to risk markets and bring out USD sellers, while a number around 0.4% could see US two-year yields rise and the USD with them.
In currency markets, the dollar index retained all of its post-payroll gains from Friday, settling at 105.26 against its major competitors.
The euro suffered steep losses to $1.0737, falling for the fourth consecutive session, amid political turmoil brought on by far-right gains in European elections and a snap election in France.
With just hours to go before the release of US CPI data, the Fed is believed to hold firm at its policy meeting, but the focus will be on maintaining three rate cuts in its ‘dot plot’ projections for this year.
Futures imply 39 basis points of Fed easing this year, equivalent to just a cut and a half.
Treasuries, which rallied overnight thanks to a strong outcome from a 10-year Treasury auction, steadied. The 10-year yield held at 4.4079%, after falling 7 basis points in the previous session.
“Treasuries will react to the dot plot and possible Powell dovish tilt with modest bullish steepening. However, continued range trading is likely given the ongoing ‘data-dependent’ outlook,” analysts at TD Securities said .
Oil prices extended gains for the third consecutive session. Brent crude futures rose 0.5% to $82.36 a barrel, while U.S. crude futures gained 0.7% to $78.45 a barrel.
Gold prices fell 0.1% to $2,313.72 an ounce.
