Asian Stocks Up as Weaker-Than-Expected U.S. Inflation Calm Worries

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By Gina Lee

Investing.com – Asia Pacific stocks were mostly up Thursday morning, continuing to rebound from two-week lows after weaker-than-expected inflation data calmed inflation worries and boosted the Dow Jones Industrial Average to a record close.

China’s Shanghai Composite gained 1.77% by 10:28 PM ET (3:28 AM GMT) and the Shenzhen Component jumped 2.46%, over speculation of further steps to tackle a selloff. The National People’s Congress will also conclude later in the day, where delegates will approve an overhaul in Hong Kong’s Legislative Council election system and a measure designed to reduce China’s technological dependence on the U.S.

Hong Kong’s Hang Seng Index gained 1.61%.

Japan’s Nikkei 225 was up 0.62% and South Korea’s KOSPI rose 2.10%. In Australia, the ASX 200 edge down 0.17%, while

Consumer price inflation data released on Wednesday disappointed expectations but eased concerns about the U.S. economy overheating and further stalled a climb in bond yields.

The data said that core consumer prices rose 0.1% month-on-month in February, down from the 0.2% growth in forecasts prepared by Investing.com but unchanged from the 0.1% growth recorded in January. Prices rose 1.3% year-on-year, slowing down slightly from the forecast 1.4% growth, and the 1.4% growth recorded in January.

Investors also cheered progress on the U.S.’ massive $1.9 trillion stimulus package. The House of Representatives gave its final approval to the bill, with President Joe Biden expected to sign it into law before Sunday when current enhanced federal unemployment benefits expire.

Ten-year Treasury yields dropped below their recent one-year highs. The U.S. government will auction 30-year Treasuries later in the day after Wednesday's auction of ten-year Treasuries met with sufficient demand.

Some investors expressed caution on high-priced growth stocks, the biggest victim of rising yields. Meanwhile, optimism over the recovery from COVID-19 thanks to the stimulus package’s progress boosted cyclical shares.

“It’s not inconsistent to have high yields with stocks going up if growth expectations are the driver and not inflation … I feel all the indications that we are getting from the central banks is exactly that, that this is good news,” UBS Wealth Management senior vice president Angela Mwanza told Bloomberg.

Other investors remained positive overall.

“The reflation trade is back on. We saw bonds and stocks rallying together and a slight easing in the U.S. dollar, which also indicates improving sentiment,” CMC Markets chief markets strategist Michael McCarthy told Reuters.

Across the Atlantic, the European Central Bank (ECB) will hand down its policy decision later in the day. It remains to be seen how the central bank will address the possible impact of higher benchmark rates on Europe’s recovery from COVID-19.

The Federal Reserve is preparing its own policy decision, which it will hand down on Mar. 17.