BEIJING - Asian shares tracked Wall Street higher on Thursday, while U.S. Treasury yields steadied and dollar retreated, as latest U.S. data raised hopes that inflation may be close to peaking, though several major central banks raised rates aggressively.
Traders were waiting for a European Central Bank meeting later in the day, to see if it was as hawkish as others have been.
MSCI's broadest index of Asia-Pacific shares outside Japan rose 0.4% in early Asian trading, buoyed by a 0.5% gain in Australia's resource-heavy shares and a 0.6% advance in mainland China's blue chip stocks. Japan's Nikkei was up 1.2%.
South Korean shares were an outlier on Thursday. The KOSPI index fell 0.4% as the central bank raised its policy rate to the highest since August 2019 in an unexpected move as it seeks to quell surging inflation.
Asian markets including Hong Kong, Singapore and Australia are on holiday on Friday for Easter, as are major European and U.S. markets.
"I think there are a couple of recent positive developments that could be boosting Asian shares today. Firstly, U.S. core consumer prices moderated... which could mean inflation pressures may start to abate soon in the U.S., and secondly, Chinese policymakers recently came out with more encouraging remarks about stabilising and supporting economic growth," said David Chao, Hong Kong-based global market strategist at Invesco.
"I've argued that an upswing in money supply and credit growth could provide a floor for Chinese equities and signal that investor sentiment may soon start to improve, especially if COVID and geopolitical concerns start to wane."
China's cabinet on Wednesday flagged upcoming cuts to banks' reserve requirement ratios (RRR) to support an economy battered by COVID-19 lockdowns.
Yields on U.S. Treasuries steadied in early Asian trade. The yield on 10-year Treasury notes was at 2.7120%, compared to an over three-year peak of 2.836%, before the U.S. data released on Tuesday showed inflation running less high than investors had feared.
The two year yield was 2.3727%, compared with a close of 2.3645% the previous day.
Retreating U.S. yields offered some relief to the bruised yen on Thursday, after it weakened past the 126 yen per dollar mark in the previous session.
The prospect of fast and aggressive U.S. interest rate hikes and growing market expectations that the Bank of Japan will keep rates ultra-low in the near term have weakened the yen.
The euro rose 0.2% against the dollar, although it was not too far away from its 1-month low on concerns about Ukraine.
Equity markets have suffered from central banks' hawkishness, but Wall Street on Wednesday rallied to end sharply higher, powered by a recovery in interest-sensitive growth stocks. The Nasdaq jumped over 2% while the S&P 500 and the Dow gained more than 1%.
Investors in U.S. stocks appear to begun buying into "the prediction that inflation is peaking" and are showing optimism that all the bad news could already be priced in, said Hebe Chen, market analyst at IG, said in a note on Thursday.
New Zealand's central bank raised interest rates by a hefty 50 basis points on Wednesday, the biggest hike in over two decades, while the Bank of Canada also raised rates by 50 bps on Wednesday, making its biggest single move in more than two decades and flagging more hikes to come.
Geopolitical risks could again cap market optimism. Ukraine warned on Wednesday that Russia was ramping up efforts in the South and East as it seeks full control of Mariupol, while Western governments committed more military help to bolster Kyiv.
Oil futures were down slightly on Thursday morning, after rising sharply in the first half of the week, as traders weighed a larger-than-expected build in U.S. oil stocks against tightening global supply.
U.S. crude dipped 0.64% to $103.58 a barrel. Brent crude fell to $108.25 per barrel.
Gold was slightly lower. Spot gold was traded at $1975.21 per ounce.
(Editing by Simon Cameron-Moore)