Asian stocks looked set to open steadily on Friday after US stocks and Treasuries rallied, as investors believed the spike in inflation was likely to be temporary, leaving room for continued support from the central bank.
Stock futures were almost unchanged in Japan and Australia and were higher in Hong Kong.
The S&P 500 climbed to a record high overnight, and the rise in tech heavyweights lifted the Nasdaq 100.
The 10-year Treasury yield fell to 1.43%, its lowest level since March, after a brief jump after a report that beat the forecast for US consumer price growth. The dollar has weakened.
The increase in CPI in May was mainly driven by categories related to broader economic opening as vaccination controls the pandemic.
Despite some signs of broader price pressures, concerns about a sharp rise in the cost of long-term borrowing, which could destabilize global markets, have diminished.
This latest market reaction suggests that investors agree with the Federal Reserve’s view of temporary inflationary pressures and that any change in ultra-adaptive policies is likely to be very gradual.
This approach was also reinforced across the Atlantic on Thursday, when the European Central Bank raised its inflation forecast and reaffirmed its commitment to support faster emergency bond purchases to support the euro area.
“The foamy CPI remains so far, but between underlying effects and pent-up demand pressures, it probably doesn’t provide a clear answer to the big inflation debate and you need to read tea leaves in the bond market,” said Anu Gaggar, senior analyst at global investments in the Commonwealth Financial Network.
“The bond market is falling in line with the Fed’s view that inflation is temporary and does not require a reduction in monetary stimulus anytime soon.”
Meanwhile, commodities have resumed their gains, becoming one of the leading reflationary games.
Oil climbed to its highest level in two years, and the Bloomberg Commodity Index traded near a six-year high.
The frenzy on meme exchanges and fluctuations in cryptocurrencies were some of the few sources of sheer market volatility.
GameStop has dropped heavily since March after the company said it plans to list more shares and said regulators are investigating trading in its shares.
The decision by international banking regulators to classify Bitcoin as the riskiest asset has affected cryptocurrencies, making it extremely expensive for banks to keep digital tokens on their balances.