Asian Stocks Steady Amid Hopes of Fed Rate Cuts

Asian stocks remained firm while the dollar weakened after low U.S. Treasury yields and decent consumer inflation data increased expectations of Federal Reserve rate cuts. Gains in Japan and Australia were prominent, bolstered by Wall Street's performance. Market analysts anticipate a potential Fed rate cut in September.

Asian stocks were stable on Thursday, with the dollar staying subdued amid lower U.S. Treasury yields following benign consumer inflation data that reinforced expectations for the Federal Reserve to cut interest rates next month. Boosted by Wall Street gains, Japan's Nikkei rose by 0.8% at 0540 GMT, while Australia's stock benchmark increased by 0.14%.

The optimistic sentiment in Japanese stocks was further enhanced by data indicating a strong economic rebound in the second quarter. Chinese blue chips also saw a 0.7% rise, supported by expectations of more stimulus from Beijing in response to weak economic data. Contrarily, Hong Kong's Hang Seng Index slipped by 0.2%.

Meanwhile, U.S. S&P 500 futures pointed to a 0.16% rise after the index climbed 0.4% on Wednesday, driven by the slowest increase in the consumer price index in over three years. Pan-European Stoxx 50 futures also rose by 0.38%.

TD Securities analysts noted in a report that the inflation data supported the likelihood of the Fed starting its rate-cutting cycle in September with a 25 basis-point reduction, though a 50 basis-point cut remains possible. The dollar weakened, touching its lowest level against the euro since last year, while the 10-year Treasury yield edged up slightly in Asian trading.

As traders remain convinced of a forthcoming Fed rate cut on September 18, there's division over whether it will be a modest 25 basis-point decrease or a more substantial 50 basis-point cut. Thursday's release of U.S. retail sales figures is poised to be a significant test, especially if the numbers indicate weakening economic conditions.

(With inputs from agencies.)