Asian markets experienced mostly positive movement on Thursday, buoyed by a robust performance on Wall Street, largely attributed to promising news regarding inflation in the U.S.

In Japan, the Nikkei 225 index climbed by 0.5% to reach 38,635.25. Recent data from the Bank of Japan indicated that wholesale prices increased by 3.8% in December compared to the previous year, which has raised expectations for potential interest rate hikes at an upcoming monetary policy meeting.

Hong Kong’s Hang Seng index saw an increase of 1.2%, closing at 19,516.62, while the Shanghai Composite index in China experienced a modest rise of nearly 0.3%, finishing at 3,237.32. Meanwhile, Australia’s S&P/ASX 200 surged by 1.4% to 8,327.00, and South Korea’s Kospi index gained 1.2%, closing at 2,526.15.

On Wall Street, significant profit announcements from Wells Fargo and other major U.S. banks propelled stock indexes to achieve their most significant gains in two months. The S&P 500 rose by 1.8% to 5,949.91, the Dow Jones Industrial Average advanced 1.7% to 43,221.55, and the Nasdaq composite jumped 2.5% to 19,511.23.

Bank stocks were among the leading performers, bolstered by several institutions reporting better-than-expected profits for the final quarter of 2024. Wells Fargo saw its shares surge by 6.7%, Citigroup followed with a rally of 6.5%, and Goldman Sachs experienced a gain of 6%. These results are particularly noteworthy, as they are some of the earliest high-profile reports for the end of 2024, drawing even more attention than usual.

In response to the inflation data, Treasury yields experienced a decline. The report, detailing the increased costs that U.S. households faced for essentials like eggs, gasoline, and housing in December, indicated that overall inflation accelerated to 2.9% compared to 2.7% in November. The yield on the 10-year Treasury fell back to 4.65% from 4.79% late Tuesday, marking a significant change after a consistent increase since September when it was below 3.65%. The yield on the two-year Treasury, which closely reflects expectations for the Federal Reserve’s actions, decreased to 4.26% from 4.37%.

While higher inflation is generally unfavorable, the underlying data presented some optimistic trends. Excluding food and energy prices, which can fluctuate significantly month-to-month, the core inflation rate eased to 3.2% in December. Economists had anticipated it would remain steady at 3.3% for four consecutive months, based on FactSet’s analysis. This core number is typically prioritized by the Federal Reserve, making the data encouraging, especially amid uncertainties regarding the stabilization of inflation improvements and the challenge of reaching the Fed’s target of 2%.

Traders on Wall Street have been navigating volatile fluctuations as they revise forecasts related to the Fed’s interest rate decisions for 2025. A potential easing of rates could support the U.S. economy and boost investment prices while possibly exacerbating inflation pressures.

It is widely believed that the latest inflation data will not persuade the Federal Reserve to lower its main interest rate during its meeting later this month, especially as it has done so in the past three consecutive meetings since September. However, economists suggest that this data might pave the way for potential rate cuts later in the year, possibly as early as March, should further indications show a decrease in inflationary pressures.

As Treasury yields rise and bonds offer enhanced interest payments, the attractiveness of bonds can place downward pressure on stock prices as investors divert their funds. Typically, this situation necessitates either a decline in stock prices or a more substantial surge in corporate profits to balance the scales.

In early trading on Thursday, U.S. benchmark crude oil saw a slight increase of 5 cents, reaching $78.76 per barrel, while Brent crude, a global benchmark, rose by 1 cent to $82.04 per barrel. The U.S. dollar depreciated against the Japanese yen, trading at 156.18 yen compared to 156.47 yen, and the euro slightly declined to $1.0288 from $1.0289.