Investors were reassured by comments made by Fed Chair Jerome Powell, who indicated that the U.S. central bank is unlikely to raise its key interest rate in response to stubborn inflation. However, Powell also expressed some uncertainty about the easing of inflation, as price increases have remained high in the first quarter of the year.
A key test for markets will come with the release of the U.S. monthly update on consumer prices, expected to ease to 3.4% in April on a year-over-year basis. In Asian trading, Tokyo’s Nikkei 225 index and Australia’s S&P/ASX 200 both saw gains, while the Shanghai Composite index in China slipped after the central bank kept a key lending rate unchanged.
Elsewhere, Taiwan’s Taiex gained and Bangkok’s SET remained stable, while markets in South Korea and Hong Kong were closed for a holiday. On Tuesday, the S&P 500 index, Dow Jones Industrial Average, and Nasdaq composite all saw gains, with technology stocks driving much of the market’s growth.
Bond yields edged lower, and investors are adjusting their expectations for interest rate cuts as inflation remains high. Wall Street is hopeful for a “soft landing” where high interest rates can curb inflation without causing a recession. Economists are watching for signs of consumer fatigue in the face of persistent inflation, with a retail sales report expected to show a softening in consumer spending.
In other trading, benchmark U.S. crude and Brent crude both saw gains, while the U.S. dollar slipped against the Japanese yen and the euro. Overall, investors are navigating a complex economic landscape with inflationary pressures and hopes for a controlled economic slowdown.
