"Slowing inflation boosts expectations of rate cuts, Asia-Pacific stock markets rise but market sentiment remains cautious"

News Agency (Asia Pacific) - After the latest US inflation data was lower than market expectations, investors remained optimistic about the possibility of the Federal Reserve cutting interest rates this year. Driven by this, major Asian stock markets generally rose on Wednesday (May 14), while the US dollar fluctuated. However, the market remained cautious in the face of global trade uncertainties.

MSCI's broadest index of Asia-Pacific shares outside Japan rose about 1.1%, showing signs of improving investor confidence in the region. In contrast, Japan's Nikkei 225 index fell slightly by 0.4%, giving up a 1.4% gain in the previous trading day.

Asian markets were driven by sentiment after the U.S. stock market rebounded sharply the day before, erasing the correction since the beginning of the year. Previously, the comprehensive tariff policy promoted by U.S. President Trump once caused market concerns, but as China and the United States announced a suspension of new tariffs and launched a 90-day negotiation, some of the pressure was released.

Hong Kong's Hang Seng Index rose 1.4%, with the technology sector performing particularly well. After Chinese e-commerce giant JD.com released better-than-expected quarterly earnings, it further boosted investor confidence in Chinese technology companies. Another focus of the market this week will be the upcoming earnings reports of Tencent and Alibaba.

European stock index futures showed signs of a slight decline before the market opened, while U.S. stocks may maintain a sideways trend. The market is waiting for more economic and policy signals to determine the next move.

IG market strategist Tony Sycamore pointed out that although the current market is optimistic, it is still necessary to be cautious in chasing the stock market in the absence of a clear global trade agreement. "The market seems to have factored in the worst case scenario, but we still need to pay attention to the progress of tariff negotiations with other countries."

The latest U.S. inflation data eased market concerns about rising prices due to tariffs and comforted investors that the Federal Reserve has room to cut interest rates this year. Although import tariffs may push up prices of some goods, market expectations are still volatile before the negotiations are concluded.

Earlier, the United States and the United Kingdom had reached a preliminary trade agreement, and China and the United States announced on Monday that they would suspend each other's tariff increases and that a 90-day negotiation window would be used to reach a broader agreement. This development helped stabilize global market sentiment.

In an interview with the media on Tuesday, Trump revealed that he might discuss the details of the trade agreement in person with Chinese President Xi Jinping, and said that the current "potential agreement" also involves multilateral consultations with India, Japan and South Korea, although no substantial results have been achieved yet.

Frederic Neumann, chief economist for Asia at HSBC, said that the current China-US negotiations have entered an observation period, and there are still many uncertainties in trade consultations with other countries. "Although market sentiment has improved, risk appetite has not yet fully recovered."

The Federal Reserve said it would continue to observe the evolution of external economic and policy risks and remain patient in making interest rate decisions.

In the bond market, the yield on the 10-year U.S. Treasury bond fell 2 basis points to 4.4768%. The U.S. dollar trend was divided, falling 0.4% against the yen to 146.88, while it remained around 1.1189 against the euro. The U.S. dollar index was basically stable after falling 0.8% in the previous trading day.

According to the latest global fund manager survey released by Bank of America, institutional investors' allocation to the US dollar has fallen to the lowest level in 19 years due to increased uncertainty and concerns about the direction of US policy, reflecting the decline in the attractiveness of US dollar assets.

Investors' next focus will be on April retail sales data, which will be released on Thursday. The data will serve as an important signal of the strength of U.S. consumer spending. In addition, Ukraine and Russia will also hold peace talks in Istanbul, with the market hoping to ease the worst conflict in Europe in recent years.

In commodity markets, U.S. crude oil prices retreated 0.5% to $63.35 a barrel, though still near a two-week high, while spot gold fell slightly to trade around $3,220 an ounce.