Asian stocks rally on soft US inflation data; Kospi surges up to 5%

Asian equities climbed on Wednesday, August 12, as investors acted on a soft US inflation reading that eased fears of possible Federal Reserve rate hikes.

The MSCI Asia Pacific Index gained 0.6%, with Japan and South Korea leading the advance.

South Korea's Kospi surged 4.48%, by far the region's standout performer. Japan's Nikkei 225 climbed 1.83%, while the broader Topix added 1.01%. Hang Seng futures meanwhile slipped 0.87%, pointing to caution creeping back into that market even as the rest of Asia rallied.

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The regional gains built on a strong session on Wall Street, where the S&P 500 pushed to within touching distance of a fresh record high. A rally in the biggest chipmakers propelled the Nasdaq 100 to a one-month peak.

US consumer prices rose in line with forecasts in July, and a key underlying inflation gauge matched its slowest annual pace since March 2021. Core CPI, which strips out volatile food and energy costs, rose 0.2% on the month and 2.5% over the year.

Short-dated Treasuries outperformed during the US session as traders trimmed their bets on further policy tightening, and money markets priced in less than even odds of a September rate rise according to a Bloomberg report.

Currency markets stayed focused on the Japanese yen, which held steady around the 159.30 per dollar mark early Thursday, edging closer to the closely watched 160 thresholds. Traders remain alert to the possibility of fresh intervention from Japanese officials to defend the currency.

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The yen has weakened more than 1% this month, eroding some of the gains achieved through joint US-Japan efforts to shore it up in late July. The offshore yuan, meanwhile, was little changed at 6.7447 per dollar. The dollar itself eased marginally against most G-10 currencies.

West Texas Intermediate crude fell 0.7% to $82.71 a barrel, breaking a six-day winning streak for Brent crude as well, which was trading around the $88 per barrel mark early Thursday, as easing inflation worries and a firmer risk appetite in stocks appeared to sap demand for the safe-haven trade that had been supporting crude prices through the preceding week.