Asian equities follow Wall Street on hopes of Fed rate pause

Asian equities followed Wall Street on Wednesday after a weak reading on US inflation raised hopes that the Federal Reserve would not raise interest rates in June.

Japan’s benchmark Topix index rose 1.4 per cent, while China’s CSI 300 index of Shanghai- and Shenzhen-listed shares climbed 0.5 per cent and Australia’s S&P/ASX 200 index rose 0.3 per cent.

Those gains came after the benchmark S&P 500 index rose 0.7 percent and the tech-focused Nasdaq Composite added 0.8 percent on the same day U.S. consumer price data showed headline inflation climbed 4.4 percent year-over-year. per cent growth slowed down. May, down from about 5 percent in April.

Weak inflation readings helped reinforce market expectations that the Fed would keep interest rates unchanged at the conclusion of its monetary policy meeting on Wednesday, although investors said the central bank could tighten policy again in July.

“Our expectation is that the Fed will leave rates unchanged in line with market pricing,” said Solita Marcelli, chief investment officer for the Americas at UBS Global Wealth Management. “However, we also expect policymakers to send a clear message to markets that at least one more hike is likely at a later meeting.”

Economists still expect the European Central Bank to raise its deposit rate by 0.25 percentage points at its meeting on Thursday.

Shares in China jumped on rising hopes of policy support from the People’s Bank of China after the central bank lowered its short-term lending rate on Tuesday for the first time in nine months.

Analysts at Goldman Sachs said the move “could suggest the beginning of additional monetary policy easing” and expect the PBoC to cut its one-year medium-term lending facility rate by 0.1 percentage point on Thursday. The rate serves as the floor for China’s benchmark prime lending rate.

Futures markets outperformed the S&P 500 to open flat later in the day, while the FTSE 100 was expected to decline 0.2 percent.