HONG KONG — Asian shares were largely higher on Tuesday, with investors focused on a US inflation report and what it means for interest rate cuts by the Federal Reserve.
Oil prices rose while U.S. futures were mixed. The yen weakened and fell close to a 34-year low.
The Japanese benchmark Nikkei 225 gained 1.1% to 39,773.13 in morning trading. The yen languished as the US dollar rose to 151.88 Japanese yen, close to a 34-year high of 151.97 yen reached in late March.
Hong Kong’s Hang Seng rose for a second day, rising 0.7% to 16,856.41, while the Shanghai Composite index fell 0.2% to 3,041.30.
In South Korea, the Kospi lost 0.3% to 2,710.41, and the Australian S&The P/ASX 200 rose 0.4% to 7,822.40.
An update on the US consumer price index will follow later Wednesday.
“The bullish sentiment coming from Friday’s jobs report, which saw indexes rise on wage growth data suggesting inflationary pressures were contained, has set the stage for a white-knuckled event as the upcoming Consumer Price Index release looms larger than life,” said Stephen Innes. managing partner at SPI Asset Management.
U.S. stock indexes were at a virtual standstill on Monday as trading settled down after a whirlwind few days that left them a little shy of their records.
The S&P500 fell less than 0.1% to 5,202.39. The Dow Jones Industrial Average tiptoed less than 0.1% lower to 38,892.80, while the Nasdaq index edged 5 points higher to 16,253.96.
A series of reports showing that inflation and the economy have remained hotter than expected have led investors to postpone their predictions for when interest rates could be eased.
This week has several flashpoints that could further shift expectations. In addition to Wednesday’s report on the inflation felt by U.S. consumers at the checkout, there will also be reports on wholesale inflation and expectations for future inflation among U.S. households.
Fed Chairman Jerome Powell recently said he still expects rate cuts this year, but the central bank needs additional confirmation that inflation is moving toward its 2% target. The Fed has kept its key interest rate at the highest level since 2001, hoping to lower the economy and investment prices enough to bring inflation under control. The risk of keeping interest rates too high for too long is that it could cause a recession.
Friday’s surprisingly strong jobs report showed that average worker hourly wages behaved as expected, even though employers hired far more workers than expected last month.
But critics say the stock prices already look expensive, given their massive rise of more than 20% from November to March. That means “achieving ambitious earnings expectations has become critical,” said Lisa Shalett, chief investment officer at Morgan Stanley Wealth Management.
“Economic growth is good, but complacency about its consequences is not,” she said.
That’s why the final earnings reporting season will start this week. Delta Air Lines, JPMorgan Chase and other banks will headline the first days of the reporting period. Analysts expect companies in the S&P500 delivers a third consecutive quarter of growth.
In the bond market, government bond yields rose, adding to year-to-date gains, due to reduced expectations for rate cuts. The yield on the 10-year government bond rose to 4.42% from less than 3.90% at the start of the year.
Benchmark U.S. crude added 10 cents to $86.53 a barrel in electronic trading on the New York Mercantile Exchange. Brent crude, by international standards, was 17 cents higher at $90.55 a barrel.
In currency trading, the euro was at $1.0857, little changed from $1.0856.