On Thursday (September 12th), Asian stock markets rose, driven by the rise in Wall Street technology stocks, and the gains extended to the entire region.

After the strongest level of USD/JPY since December fell, the Japanese and South Korean stock markets rose. The MSCI Asia Pacific Index has seen its largest increase in nearly a month. Nvidia rose 8.2% overnight, and the technology stock index in the region rose more than 2%. The Chinese stock market rose in early trading.

CPI leads to significant interest rate cuts, shattering expectations

According to data released by the US Bureau of Labor Statistics on Wednesday, the core consumer price index (CPI), which excludes food and energy costs, rose 0.3% from July, the largest increase in four months and a 3.2% increase from the same period last year. According to Bloomberg calculations, the three-month annualized growth rate has accelerated from 1.6% in July to 2.1%.

This is not the CPI report that the market wants to see, "said Seema Shah of Principal Asset Management." Although this data does not constitute an obstacle to policy action next week, hawkish members of the committee may use this CPI report to emphasize the need for greater caution when dealing with the final stage of inflation

Swap pricing shows that the Federal Reserve is expected to cut interest rates by 25 basis points at next week's meeting, and may even cut interest rates by 50 basis points. Once the Federal Reserve begins to reduce borrowing costs, the debate over the pace of subsequent interest rate cuts will become a focal point.

US interest rates

The biggest challenge facing investors is whether the economy will enter a "soft landing" that only requires a series of mild interest rate cuts, or a more severe "hard landing" in the coming year. At present, the Federal Reserve's swap market expects a cumulative rate cut of over 140 basis points by the interest rate decision meeting on January 29 next year, which is equivalent to roughly two 50 basis point rate cuts in the next four meetings, provided that there are no unexpected events.

Evercore's Krishna Guha said, "Stronger than expected core inflation data will make it more difficult for Powell to implement a 50 basis point rate cut in September. We still believe that initiating a 50 basis point rate cut is a suitable measure and may even gain the upper hand now. However, this possibility has decreased, increasing the risk to the market and a soft landing

Guha also pointed out that if the Federal Reserve does not cut interest rates by 50 basis points next week, it may implement this action in November.

The US bond market remained stable, with the yield of 10-year treasury bond bonds remaining at 3.67% on Wednesday. The yields in Australia and New Zealand have slightly increased.

The US dollar index remained stable after falling on Wednesday. The comments of Naoki Tamura, a member of the Policy Committee of the Bank of Japan, pushed the yen slightly higher, mentioning the possibility of raising the benchmark interest rate to at least 1%. On Wednesday, another committee member Junko Nakagawa stated that as long as the economic performance meets expectations, the central bank will continue to adjust policies, and her remarks have also driven the yen to strengthen.

Japan's Producer Price Index (PPI) for August was lower than expected. Other data to be released in Asia include producer prices in Hong Kong, inflation and industrial production in India, and interest rate decisions in Pakistan. Investors have also shown new interest in Southeast Asian stocks, which have become a favored trading partner for fund managers as the Federal Reserve shifts its policies.

In terms of commodities, oil prices continued Wednesday's rise as Hurricane Francine hit a key oil producing area in the Gulf of Mexico, prompting traders to replenish their bearish bets.

After the August US CPI report weakened market expectations for a significant interest rate cut by the Federal Reserve next week, the rise in gold prices was hindered and is currently stabilizing and oscillating around $258.

Since the beginning of this year, gold prices have risen by over one-fifth, and expectations for the Federal Reserve to soon initiate a rate cut cycle are increasing, supporting the recent strength of gold prices. The strong buying by the central bank and the strong demand in the over-the-counter market have also driven the rise of gold.

In terms of corporate news, according to insiders, OpenAI is in talks with investors to raise $6.5 billion, with a valuation of $150 billion. Nvidia CEO Huang Renxun said that limited product supply has left some customers feeling frustrated and exacerbated tensions.