Asian share markets advanced on Monday, buoyed by investor relief after recent US inflation figures came in slightly below expectations, bolstering hopes of a near-term interest rate cut by the Federal Reserve.
The data reinforced expectations that inflationary pressures in the world’s largest economy are cooling, offering global markets some breathing room.
Japan’s Nikkei 225 led gains across the region, rising by over 1 percent to approach its previous record highs. South Korea’s Kospi and Australia’s ASX 200 also traded in positive territory, while Hong Kong’s Hang Seng Index extended its recovery, supported by stronger-than-expected earnings in the tech sector.
Chinese mainland indices showed moderate gains, with investors remaining cautiously optimistic amid ongoing concerns over property sector instability and sluggish consumer confidence.
The rally follows the release of the latest US Consumer Price Index (CPI) data, which showed core inflation softening slightly more than forecast.
This has prompted traders to increase bets that the Federal Reserve could begin cutting interest rates as early as the fourth quarter of 2025. The Fed’s next meeting is being closely watched, but market sentiment now leans more dovishly.
As a result, the US dollar remained on the defensive in early Monday trading, edging lower against major Asian currencies including the Japanese yen and the Chinese yuan.
The dollar index, which measures the greenback’s strength against a basket of six major currencies, slipped marginally, reflecting the reduced urgency for further monetary tightening.
In the bond markets, yields on US Treasury notes also dipped as investors adjusted their expectations for future interest rates.
Meanwhile, commodity markets saw limited movement, with oil prices holding steady and gold prices slightly firmer due to the weaker dollar.
While sentiment across Asia remains generally positive, investors are expected to tread cautiously ahead of key economic releases later in the week, including US retail sales data and commentary from Federal Reserve officials.
Still, the softer inflation reading has clearly lifted global risk appetite and renewed momentum for equities, at least in the short term.
Written By Ian Maleve
