Asian stocks rise on Fed pause bets, China lags on weak inflation

Investing.com -- Most Asian stocks advanced on Friday, as weak U.S. labor data ramped up bets on a pause in the Federal Reserve’s rate hike cycle, although disappointing inflation readings from China capped broader gains.

Technology stocks lead gains as Fed pause bets rise

Technology-heavy indexes such as South Korea’s KOSPI and the Taiwan Weighted index rose 0.9% each on Friday, as an unexpected rise in weekly U.S. jobless claims pushed up bets that the Fed will hold rates steady next week.

Japan’s Nikkei 225 and TOPIX were the best performers for the day, up 1.7% and 1.3%, respectively, and also moving back towards 33-year peaks hit earlier in the week. Positive economic readings from the country, chiefly an upward revision in first-quarter GDP, also helped sentiment towards local stocks.

Gains in major tech stocks also kept Hong Kong’s Hang Seng index in positive territory. Risky, returns-focused growth stocks tend to benefit from the prospect of fewer interest rate hikes, given that higher rates tend to weigh on their future returns.

Sentiment towards tech stocks was also buoyed by a rush into artificial intelligence-exposed stocks, amid forecasts that the space will increase substantially in value this year.

Chinese search engine giant Baidu Inc (HK:9888) (NASDAQ:BIDU), which has its own AI tool in development, rose 1.2%, while Japanese semiconductor testing equipment maker Advantest Corp (TYO:6857) added 1.1%.

A strong overnight finish on Wall Street provided a positive lead-in to local shares, as the S&P 500 entered a bull market after recovering from recent lows.

Australia's ASX 200 added 0.4%, while India's Nifty 50 rose slightly in early trade.

Chinese stocks held back amid weak inflation, stimulus bets

Chinese stock indexes largely lagged their Asian peers on Friday, with the Shanghai Shenzhen CSI 300 down 0.1%, while the Shanghai Composite traded sideways.

Data on Friday showed that Chinese consumer inflation shrank in May from the prior month, while producer inflation fell at its fastest pace in seven years.

The readings pointed to more weakness in China’s biggest economic engines, and came after a string of other weak indicators over the past two weeks, fueling more concerns over a Chinese economic recovery this year.

Chinese stocks have largely wiped out all their gains this year as sentiment over a recovery-driven rally soured.

But further losses in local stocks were somewhat limited by bets that the Chinese government will roll out more stimulus measures this year to support growth. Anticipation of more interest rate cuts in the country grew after several major state-run banks cut rates on yuan deposits this week.