Asia shares gain on receding inflation fears 

Asia shares gain on receding inflation fears

Asian stocks rose on Friday as concerns about inflation and the prospects of an early tapering of stimulus by the Federal Reserve tempered. 

Japan’s tech-heavy Nikkei and Taiwan’s stock index stood out in the region with gains of 0.8% and 1.2% respectively.

Chinese blue chips lost 0.8%, however, weighed by financials and capping broader gains in the region.

Overall, MSCI’s broadest index of Asia-Pacific shares outside Japan added 0.1%, putting it on track for a 1.9% weekly gain. The gauge’s tech components jumped 0.6% over the day.

Futures pointed to a further 0.3% rise for the S&P 500 later in the global day, following a more than 1% jump on Thursday.

Tech stocks led those gains as Treasury yields declined following a weaker-than-expected U.S. business activity reading. A decline in commodity prices, particularly oil, also undermined the thesis for too-hot inflation.

The Philadelphia Federal Reserve Bank said its business activity index fell to 31.5 from 50.2 in April, its highest pace in nearly half a century. 

Other data on Thursday showed the number of Americans filing new claims for unemployment benefits dropped further below 500,000 last week, but jobless rolls swelled in early May, which could temper expectations for an acceleration in employment growth this month. 

The Dow Jones Industrial Average rose 0.6%, while the Nasdaq Composite added 1.8%.

The yield on benchmark 10-year Treasury notes held Thursday’s more-than 4 basis-point decline to hover around 1.635% in Asia.

In the foreign exchange market, the dollar was languishing near multi-month lows following its steepest slide in about two weeks on Thursday as bets of early U.S. rate hikes pared back.

The dollar index, which measures the greenback against a basket of six peers, was at 89.755, little changed after the previous session’s 0.4% decline.

Damon Harrison
Market Analyst, IPG Group