Stocks in Asia gain as US inflation slows

Friday's data bolstered the view that US inflation below the Federal Reserve's target may be structural rather than transitory, prompting traders to slightly reduce the odds of another interest-rate increase in December.
Friday's data bolstered the view that US inflation below the Federal Reserve's target may be structural rather than transitory, prompting traders to slightly reduce the odds of another interest-rate increase in December. PHOTO: REUTERS

SYDNEY (BLOOMBERG) - Stocks in Asia advanced on Monday (Oct 16) after inflation data in the US added to evidence that global growth is continuing steadily with limited price pressures in the American economy.

Equity indexes climbed in Japan, Australia and South Korea with a gauge of Asian stocks trading at the highest level since 2007.

Friday's data bolstered the view that US inflation below the Federal Reserve's target may be structural rather than transitory, prompting traders to slightly reduce the odds of another interest-rate increase in December. China consumer and producers price data is due on Monday, one of the remaining data points ahead of the start of the Party Congress later this week.

Federal Reserve Chair Janet Yellen said on Sunday that her "best guess" is consumer prices will soon accelerate after a period of surprising softness, a forecast echoed by European Central Bank President Mario Draghi and Bank of England Governor Mark Carney. Excluding food and energy, so-called core prices rose 0.5 per cent in September, below an estimate of 0.6 per cent.

With central-bank officials appearing determined to raise rates in December, regardless of whether price growth is at their 2 per cent target, some money managers are raising the spectre of the US yield curve eventually inverting, oftentimes a signal of an impending recession.

Traders will also be watching political developments in Germany. German Chancellor Angela Merkel heads into talks this week to form a national government weakened after her Christian Democratic Union suffered a defeat in Lower Saxony, Volkswagen AG's home state.

Japan's Topix index advanced 0.5 per cent as of 9:14am Tokyo time and Australia's S&P/ASX 200 Index rose 0.7 per cent. South Korea's Kospi index gained 0.4 per cent.

Futures on Hong Kong's Hang Seng Index were up 0.5 per cent.

Futures contracts on the S&P 500 Index added 0.1 per cent. The underlying gauge gained 0.2 per cent last week.

The MSCI Asia Pacific Index rose 0.4 per cent to touch its highest level since November 2007.

The Bloomberg Dollar Spot Index was little changed. It lost 0.6 per cent last week, snapping four weeks of gains. It remains more than 8 per cent lower this year.

The yen was at 111.91 per dollar after climbing 0.4 per cent on Friday. The euro was little changed at US$1.1818.

West Texas Intermediate crude climbed 0.9 per cent to US$51.92 a barrel.

Gold was steady at US$1,304.04 an ounce.

Here are some key events coming up this week: Chinese President Xi Jinping gives the opening speech at the 19th Communist Party Congress in Beijing on Wednesday.

China releases data for GDP, industrial production and retail sales on Thursday.

US economic data will include a couple of September housing reports. Beginning construction on new homes and sales of previously owned properties will probably show the negative effects of Hurricanes Harvey and Irma on demand and building.

Catalan President Carles Puigdemont faces a deadline to clarify to the Spanish government whether he's actually declared independence for the region.