Australia

Australian shares are heading up this morning following gains in the US. Investors welcomed the June consumer-price index (CPI) report, which not only showed improvement in headline inflation but a slowdown in core prices as well. The core CPI, which excludes food and energy prices, rose 0.2% last month compared to 0.4% in May.

ASX futures were up 63 points or 0.9% as of 6:30am on Thursday, indicating a higher open.

US stock indices advanced Wednesday after June inflation data came in cooler than Wall Street expected. Bond yields fell.

The S&P 500 rose 0.7% to close at the highest level since April 2022. The Dow Jones Industrial Average added 0.3%, while the tech-heavy Nasdaq Composite was 1.2% higher. Canadian stocks also gained, with the benchmark S&P/TSX Composite climbing 1.0%.

The latest CPI data showed that consumer prices rose 3% in June from a year earlier, the slowest pace in more than two years. Core CPI, which excludes volatile food and energy costs, rose 0.2% from May. Economists had expected a 0.3% increase.

In commodity markets, Brent crude oil added 1.2% to US$80.36 a barrel while gold gained 1.3% to US$1,957.91.

Australian government bonds were lower, with the 2 Year yield declining to 4.12% and the 10 Year yield also dipping to 4.12%. US Treasury notes were higher, with the 2 Year yield increasing to 4.74% and the 10 Year yield rising to 3.86%.

The Australian dollar moved up to 67.87 US cents from its previous close of 66.84. The Wall Street Journal Dollar Index, which tracks the US dollar against 16 other currencies, dipped to 95.27.

Asia

Chinese shares ended lower on a possible technical pullback, snapping two sessions of gains. Telecom and software stocks dragged on the market. China Mobile dropped 2.6% and Beijing Kingsoft Office Software lost 2.8%. Investors were focused on key US inflation data due later, which could shape market bets on Fed tightening. The China recovery growth story remained unclear. UBS economists noted that better-than-expected credit-growth data Tuesday showed continued support for the infrastructure and corporate sectors, but other figures have been less convincing and investors could be hoping for more stimulus. Energy and banking stocks gained. PetroChina added 1.8% and China Merchants Bank rose 1.5%. The benchmark Shanghai Composite Index lost 0.8% to 3196.13, the Shenzhen Composite Index fell 1.1% and the tech-heavy ChiNext Price Index shed 0.9%.

Hong Kong stocks ended the session higher, with the benchmark Hang Seng Index adding 1.1% to settle at 18860.95. Internet platform companies and tech giants led gains, after China's top officials acknowledged the industry's role in business innovation and employment creation. Food-delivery company Meituan surged 4.3%, game developer NetEase added 2.6% and social-media app operator Tencent rose 1.9%. The Hang Seng Tech index finished 2.0% higher at 4081.37.

Japanese stocks ended lower, dragged by falls in electronics makers and trading houses, as caution continued over the scope of policy tightening by central banks. Lasertec dropped 5.5% and Marubeni Corp. declined 2.7%. The Nikkei Stock Average fell 0.8% to 31943.93.

India's benchmark Sensex index closed 0.3% lower at 65393.90, weighed by auto and financial stocks. Investors were focused on quarterly results as earnings season kicks off. Tata Consultancy Services ended 0.4% lower after reporting 1Q results right before the market closed, with net profit rising to INR110.74 billion from INR94.78 billion a year earlier. Among individual losers, Tata Motors shed 1.15%, IndusInd Bank dropped 0.9% and HDFC Bank declined 0.95%. Meanwhile, Sun Pharmaceutical Industries rose 0.4% and Nestle India added 0.4%.

Europe

European stocks rose ahead of US inflation data and a likely higher open on Wall Street. The pan-European Stoxx Europe 600 and the German DAX both gained 1.5% while the French CAC 40 advanced 1.6%. Tech and mining stocks were among the biggest risers.

"Market participants are eagerly awaiting the US inflation report, set to be released later today," IG analysts wrote. "Economists predict the consumer-price index (CPI) will have risen by 3.1% in June, following May's 4% increase."

London’s FTSE 100 index leaped 1.8% to 7416 points, in its best one-day gain since early June, after US inflation data came in softer than expected. Higher commodity prices and the latest set of UK bank stress tests also "gave the sector a clean bill of health," CMC Markets analyst Michael Hewson wrote.

Financial shares ticked higher, as Hewson explained, after the Bank of England said that even if rates continued to rise, they were in a strong position. Miners Antofagasta and Glencore outperformed the British index, closing up 5.6% and 4.9%, respectively.

North America

US stock indices advanced Wednesday after June inflation data came in cooler than Wall Street expected. Bond yields fell.

The S&P 500 rose 0.7% to close at the highest level since April 2022. The Dow Jones Industrial Average added 0.3%, while the tech-heavy Nasdaq Composite was 1.2% higher. Canadian stocks also gained, with the benchmark S&P/TSX Composite climbing 1.0%.

The latest CPI data showed that consumer prices rose 3% in June from a year earlier, the slowest pace in more than two years. Core CPI, which excludes volatile food and energy costs, rose 0.2% from May. Economists had expected a 0.3% increase.

Inflation data is a key factor in the Federal Reserve's decision making this month and beyond. Traders in interest rate derivatives are currently betting that a July rate increase may be the Fed's last.

"A hike in July is pretty much locked in, but after that it's all to play for," said Deutsche Bank strategist Jim Reid.

Stock gains were broad-based, with all S&P 500 sectors except healthcare and industrials closing higher. Markets have rallied this year in part based on the view that the Fed will successfully rein in inflation without causing a severe recession, and Wednesday's inflation reading bolstered that view.

"Markets are ripping higher today as optimism regarding the Fed being near the end of its tightening campaign thrives," said José Torres, senior economist at Interactive Brokers.
Several investors said they see the inflation report changing the Fed's path.

"The current figures make a strong case against additional rate hikes," said Jon Maier, chief investment officer at Global X. "The Fed, which had potentially planned two more hikes this year, might reassess its strategy."

Ronald Temple, chief market strategist at Lazard, wrote that there is "nothing not to like in the report.... It's too early to pop the champagne, but it's not too early to start chilling the bottle."

Large technology firms extended recent gains, with Nvidia up 3.5% and Meta Platforms 3.7% higher.

Recursion Pharmaceuticals jumped 78% after the biotech firm said that Nvidia is investing $50 million to boost its drug-discovery companies.

Domino's Pizza jumped 11% after signing a deal with Uber Technologies to list its menus on Uber's food-delivery apps, reversing a long-held stance against working with food-delivery companies. Domino's, the world's largest pizza company, was the S&P 500's best performer.

Regional bank stocks also outperformed. Comerica, Zions Bancorp and KeyCorp were among the S&P 500's best performers.