Asian stock markets jumped higher, following their U.S. counterparts yesterday in a general rally as investors bought stocks on signs of easing fears over a tariff war between the United States and China.
The yen and the Swiss franc also rose. The dollar slumped 0.5 percent against the yen, which has typically performed well in periods of uncertainty or strong gains on the yen-buying Nikkei index.
The Cboe Global Markets index tracking the more than 600 largest U.S. exchange-traded funds briefly moved above its 20-day moving average. The move indicates that technical buy signals have begun to emerge.
Yesterday, investors followed a bullish assessment from Federal Reserve Chairman Jerome Powell as well as assurances from U.S. President Donald Trump that he is open to a deal with China in hopes of averting a full-blown trade war.
“The market sees it as both leaders reaching out and talking about wanting to get this thing done,” said Brian Battle, director of trading at Performance Trust Capital Partners in Chicago. “It’s giving them some of the confidence that things are going to get resolved.”
Stocks surged, with the Dow surging 293 points and S&P 500 closing at a record high.
Hailed by investors as an effective inflation gauge for the U.S., the consumer price index for May climbed 2.4 percent from a year earlier, the largest annual increase since February 2012. The core CPI — excluding volatile food and energy prices — climbed 2.1 percent from a year earlier, up from 1.9 percent the previous month.
“We had a pretty easy inflation reading,” said Stephen Wood, chief market strategist at Russell Investments in New York. “The market wasn’t expecting that result.”
With many investors factoring in protectionist steps by Trump and warnings from the Fed that monetary policy may be tightening too quickly, Wood said that while the inflation number was a positive, he expects further moderation to come and fresh tariffs to come.
“People are weighing this higher wage level coming through with inflationary ramifications,” he said. “They’re anticipating this is only a taste of things to come.”
In Asia, Australia’s S&P/ASX 200 index jumped 1.6 percent, while Korea’s Kospi gained 1.8 percent. Hong Kong’s Hang Seng Index increased 1.1 percent. In China, the Shanghai Composite Index rose 1.2 percent.
The MSCI Asia Pacific index of 482 stocks gained 0.5 percent. Japan’s Topix jumped 1.4 percent.
After more than three months of uncertainty that had dented Asia’s markets, Hong Kong’s Hang Seng Index has surged about 6 percent and the Shanghai Composite Index about 4 percent in recent days as investors count on a deal with China.
“I don’t think they’re there yet. It will take further consultation and hopefully a resolution,” said Mark Luschini, chief investment strategist at Janney Montgomery Scott.
However, Luschini said he remains “optimistic.” He said he still expects the market to rise. “When you look at market cycles like this, you tend to get to the point where there is confirmation around all the points that people were skeptical about. I don’t think we’re there yet.”