Asian stocks rose after the Federal Reserve's preferred inflation gauge came in below expectations, rekindling bets of a rate cut. The dollar was steady.

The MSCI Asia Pacific Index snapped a six-day slide, with indexes in Australia, Japan and South Korea up about 0.5%. Futures in Hong Kong pointed to gains. U.S. equity contracts rose after the S&P 500 Index rose 1.1% on Friday, as personal consumption spending rose at its slowest pace since May.

Monday's gains will provide some relief to global markets after stocks suffered their worst weekly decline in more than three months as a slew of strong U.S. economic data prompted the Fed to scale back its anticipated rate cuts in 2025. With Chairman Jerome Powell focused on progress on inflation, Friday's muted numbers are likely to reassure policymakers — and investors — that the economy is cooling despite its strength. Australia's 10-year yield fell six basis points in early trade, following a rally in U.S. Treasury bonds after Friday's PCE data. Government bonds were little changed in Asia on Monday.

The Bloomberg Dollar Index was steady after falling 0.5% on Friday. President Joe Biden signed a funding bill to keep the U.S. government operating through mid-March, avoiding a year-end shutdown and delaying future spending decisions into Donald Trump's presidency.

Sentiment could change quickly as investors await President-elect Trump's inauguration in January and the prospect of broad global tariffs, adding to an already difficult time in developing Asia as sentiment toward Chinese assets fades.

Asian stocks are set for their first quarterly loss since September 2023 while a gauge of the region's currencies fell to its lowest in more than two years last week. Yields on one-year Chinese Treasuries fell below levels last seen in the global financial crisis on Friday, as traders increased bets on monetary easing.(azf)

Source: Bloomberg