Asian stocks were heading for a fifth straight month of gains on Friday, supported by growing speculation that slowing U.S. inflation would allow the Federal Reserve to ease interest rates in the during the year.
US Democratic President Joe Biden and his Republican rival Donald Trump will take the stage at 0100 GMT for their first debate of the year ahead of the US presidential election in November.
Chinese markets, in particular, will be watching for commentary on trade relations with Beijing, which have deteriorated in recent years.
On the data front, May US Personal Consumption Expenditure (PCE) Price Index figures – the Fed’s preferred measure of inflation – are due later on Friday, and could bring more clarity on the outlook for US interest rates.
“If tonight’s PCE core inflation turns out to be much higher than the 2.6% expected and after upside surprises in Canada and Australia inflation data this week, it would fuel concerns that the decline in global inflation has bottomed out and may have accelerated in some countries,” said Tony Sycamore, market analyst at IG.
MSCI’s index of Asia-Pacific stocks outside Japan rose 0.06% at the start of the Asian session and was on track to gain 3.2% for the month, its best performance since February.
Growing expectations of an imminent Fed easing cycle and momentum from the artificial intelligence boom have sparked a risk-on rally in stock markets and catapulted Wall Street to record highs, resulting in to push Asian stocks higher.
According to the CME’s FedWatch tool, traders now see a 64% chance of the Fed’s first interest rate cut in September, up from 50% a month ago.
Japan’s Nikkei jumped 0.78%, reversing some of its losses from the previous session. It was targeting a monthly gain of 3%, helped by a weak yen and a rally in technology stocks.
S&P 500 and Nasdaq futures both rose, 0.18% and 0.3%, respectively.
In currencies, the yen continued to languish near a 38-year low at the weaker side of 160 per dollar, leaving markets on edge over any intervention by Japanese authorities to support the currency.
The yen was marginally higher at 160.68 per dollar, but is expected to lose more than 2% over the month as it continues to be weighed down by interest rate differentials between the United States and Japan.
“Considering that the current pace of depreciation is slower than in April, there is no reason why 160 should be the line in the sand,” said Vincent Chung, associate portfolio manager for T. Rowe Price’s diversified income bond strategy.
“Most forecasts suggest that intervention would likely occur if there were a rapid depreciation to 163.
Tokyo spent 9.79 trillion yen ($60.94 billion) in late April and early May to push the yen up 5 percent from a 34-year low of 160.245.
Data on Friday showed core consumer prices in Japan’s capital rose 2.1% in June from a year earlier, underscoring the challenge the Bank of Japan faces in timing its next interest rate hike as cost pressures from a weak yen keep inflation above its 2% target but also hurt consumption.
The euro was up 0.04% at $1.0707, although heading for a monthly decline of 1.3%, as the common currency continued to suffer from political unrest in the bloc, with the early elections in France which should begin this weekend.
In the commodity markets, gold suffered the weight of the strength of the dollar and fell 0.14% to 2,324.12 dollars per ounce.
Brent crude oil futures rose 0.24% to $86.60 a barrel, while U.S. West Texas Intermediate crude futures gained 0.29% to $81.97 a barrel.
