Asia report: Markets mixed after US consumer prices surge

Markets in Asia finished in a mixed state on Friday, as investors digested the latest inflation data out of the United States overnight, which showed consumer prices surging at the fastest rate since 2008.

In Japan, the Nikkei 225 slipped 0.03% to 28,948.73, as the yen weakened 0.17% against the dollar to last trade at JPY 109.52.

Of the major components on the benchmark index, automation specialist Fanuc was down 0.64%, fashion firm Fast Retailing lost 0.94%, and technology conglomerate SoftBank Group was off 0.27%.

The broader Topix index was behind 0.14% by the end of trading in Tokyo, closing at 1,954.02.

On the mainland, the Shanghai Composite was down 0.58% at 3,589.75, and the smaller, technology-heavy Shenzhen Composite was 0.6% weaker at 2,407.93.

South Korea’s Kospi advanced 0.77% to 3,249.32, while the Hang Seng Index in Hong Kong was 0.36% higher at 28,842.13.

Seoul’s blue-chip technology stocks were mixed, with Samsung Electronics flat, while SK Hynix jumped 4.07%.

The moves in Asia came after the S&P 500 closed at a record high overnight, after the Labor Department reported the much-anticipated inflation data for May.

According to the department, consumer prices were up 5% year-on-year in May, making for the fastest gains since 2008, and well ahead of a 4.7% increase pencilled in by economists.

“If faster-than-expected inflation didn’t wreak havoc across equities posterior to the consumer price index release, it’s mainly because, despite the fastening inflation, the inflation expectations for the second half of the year are easing,” said Swissquote Bank senior analyst Ipek Ozkardeskaya.

“Given the fact that last month’s figures were also faster-than-expected, one may question whether the inflation expectations are fundamentally softer than what the reality has to offer.

“Could it mean that the market is wrong expecting an imminent downturn in inflation in the coming months?”

Ozkardeskaya said that was a possibility, but noted that markets were firmly of the view that inflation should ease shortly based on two leading factors - second-hand car prices, which explain a part of the current jump in US CPI, should ease, while energy and commodity should consolidate, and ideally pull back from multi-year high levels.

“Otherwise, the US 10-year treasury yield would not have tanked below the 1.45% level as inflation hit 5%.

“So, the least we can say is that yesterday’s inflation data did not really awaken the Federal Reserve hawks, nor triggered a sell-off across equities.”

Oil prices were higher as the region entered the weekend, with Brent crude last up 0.17% at $72.64 per barrel, and West Texas Intermediate adding 0.14% to $70.39.

In Australia, the S&P/ASX 200 managed gains of 0.13% to 7,312.30, while across the Tasman Sea, New Zealand’s S&P/NZX 50 was 0.26% firmer at 12,550.39.

The down under dollars were in a mixed state against the greenback, with the Aussie last 0.02% stronger at AUD 1.2895, while the Kiwi weakened 0.09% to NZD 1.3912.