Markets surge on hopes Fed close to end of hiking cycle

Asian markets leaped Thursday on optimism the Federal Reserve's long-running campaign of interest rate hikes could be near an end after data showed US inflation rose less than expected last month.

Traders already had a spring in their step this week on signs that the bank's monetary tightening measures were kicking in, fanning speculation this month's expected hike could be the last of an elongated cycle.

And the mood brightened further Wednesday when the Labor Department said the consumer price index came in at 3.0 percent in June, the lowest since March 2021 and sharply down from 4.0 percent in May. The Fed's target is two percent.

On top of that, the "core" rate, which excludes the volatile food and energy components and is seen as a better sign of underlying inflation, sank to its lowest since 2021.

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The readings follow last week's better-than-hoped personal consumption expenditures data -- seen as the Fed's preferred gauge -- and stoked bets that the bank will hike just once more this month before calling it quits.

Analysts also pointed out that while showing signs of softness, the economy remained in rude health and the labour market was still robust, suggesting the recession many had feared earlier this year could be avoided.

"The economy is defying predictions that inflation would not fall absent significant job destruction," Lael Brainard, director of the National Economic Council and former Fed vice chair, told the Economic Club of New York.

Also Wednesday, the Fed's "beige book" survey of the economy showed activity had improved since late May thanks to strong tourism and travel.

Wall Street cheered the latest figures, with the Nasdaq up more than one percent as tech firms are more susceptible to borrowing costs, while European markets also surged.

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And Asia happily picked up the baton, with Hong Kong up more than two percent while Tokyo, Sydney, Seoul, Singapore, Taipei and Manila were all up more than one percent.

Shanghai, Jakarta and Wellington were also well up.

And the dollar struggled to rebound from losses Wednesday against its main peers, with the yen holding below 139 to the greenback, sterling hovering around a 15-month-high of $1.30 and the euro at multi-month highs.

Hong Kong's tech giants were among the Hang Seng Index's best performers on hopes that China's crackdown on the sector is near an end.

That optimism was boosted by state media reports that Premier Li Qiang met representatives from industry leaders including Alibaba and TikTok's Chinese counterpart Douyin on Wednesday.

Li "listened to the opinions and suggestions" of the sector for a "healthy development" of the digital economy, broadcaster CCTV said.

Representatives of Alibaba's cloud computing arm, e-commerce champions JD.com and Pinduoduo, and social networks Douyin and Instagram-like Xiaohongshu were among those present.

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"I hope many digital companies will firmly believe in the future," said Li, according to CCTV.

The imposition of hefty fines for fintech affiliates of Tencent and Alibaba last week was seen as a signal the painful crackdown had wound down.

Traders are also keeping watch for any statements out of Beijing after officials announced a series of pledges to support the struggling property sector and indicated other growth-boosting measures would be outlined.

Key figures around 0230 GMT

Tokyo - Nikkei 225: UP 1.3 percent at 32,357.04 (break)

Hong Kong - Hang Seng Index: UP 2.3 percent at 19,292.09

Shanghai - Composite: UP 0.7 percent at 3,218.85

Euro/dollar: UP at $1.1140 from $1.1138 on Wednesday

Dollar/yen: UP at 138.52 yen from 138.47 yen

Pound/dollar: UP at $1.3010 from $1.2992

Euro/pound: UP at 85.73 pence from 85.70 pence

West Texas Intermediate: UP 0.1 percent at $75.80 per barrel

Brent North Sea crude: UP 0.1 percent at $80.19 per barrel

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New York - Dow: UP 0.3 percent at 34,347.43 (close)

London - FTSE 100: UP 1.8 percent at 7,416.11 (close)

Source: AFP