A global rally in stocks and bonds spread into Asia on Wednesday after tame U.S. inflation data reassured investors that the Federal Reserve would raise interest rates slowly. Japanese shares rose more than two percent to a six-week peak as technology stocks rebounded following heavy losses in recent days. Disk drive parts maker TDK <6762.T> rose more than three percent. The dollar was steady near a one-week low against the euro after falling on Tuesday, when tame consumer price numbers and comments by Fed Chairman Alan Greenspan reinforced the view that rate increases to tackle inflation would be gradual. "I think the market was looking for something to get excited about in the data. But they didn't find it, and that dampened expectations and here we are again talking about measured rate rises," said Naomi Fink, currency strategist at BNP Paribas.
Tuesday's data showed the U.S. consumer price index (CPI) rose 0.6 percent in May, above economists' forecast for a 0.4 percent rise. But core CPI, which strips out food and energy and is more closely watched by the Fed for inflation trends, advanced just 0.2 percent, matching expectations. In remarks at a Senate Banking Committee hearing, Greenspan said "inflationary pressures are not likely to be a serious concern in the period ahead" and rate increases are "very likely to be measured over the quarters ahead". Investors widely expect the Fed to raise rates by a quarter of a percent at the end of the month, but comments last week by Fed officials had stirred speculation that a half-point rise might be in the pipeline.
NIKON SNAPPED UP
Tokyo's Nikkei average <.N225> rose as much as 2.5 percent to a six-week high of 11,673.48 before ending morning trade up 2.25 percent at 11,644.11. Nikon Corp <7731.T> gained 1.9 percent after saying it would boost production of a hot-selling digital camera. An MSCI index of shares elsewhere in the Asia Pacific <.MSCIAPJ> was one percent stronger. South Korea's benchmark <.KS11> gained 1.2 percent. Shares in KTF Corp <032390.KS> climbed 5.6 percent after Goldman Sachs said the mobile phone operator would be the least hurt by a marketing suspension imposed on the country's wireless firms. Benchmarks elsewhere rose one percent in Hong Kong <.HSI>, half a percent in Australia <.AXJO> and 0.2 percent in Singapore <.STI>, but fell 0.6 percent in Taiwan <.TWII>. "The Wall Street gain was positive to the local market but some people still used the rises to sell as they are concerned about the corporate outlook," said Kevin Lin, asset manager at Shinkong Investment Trust. On Wall Street, the Dow Jones industrial average <.DJI> gained 0.4 percent and the Nasdaq Composite Index <.IXIC> added 1.3 percent. European stocks also gained.
But shares in Oracle Corp , the world's second-largest software maker, slipped 2.5 percent in after-hours U.S. trade, wiping out a gain of 1.4 percent in the regular session, despite the company reporting a 15 percent jump in quarterly profits. The results disappointed some investors expecting a year-on-year improvement in new business software license sales. The dollar weakened on Tuesday as the likelihood of aggressive rate rises retreated, and stayed weak into Asian trade. It was trading at around 109.50 yen and at $1.2148 versus the euro .
BONDS FIRM
Japanese government bond (JGB) prices firmed for a second day on the outlook for U.S. rates. The yield on the benchmark 10-year JGB <0#JPTSY=JBTC> was down 1.5 basis points at 1.785 percent, after hitting a three-and-a-half-year high of 1.855 percent on Monday. U.S. Treasuries were steady after their prices surged on Tuesday, pushing yields of the benchmark 10-year note to their biggest drop since the market reopened after the attacks of September 11, 2001. The 10-year note gained 1-18/32, taking its yield to 4.67 percent from 4.87 percent in U.S. trade. It was trading at around 4.69 percent in Asia. Oil prices were steady after falling on Tuesday, when expectations of rising global supply countered news of a sabotage attack in Iraq that shut the country's main southern export terminal. U.S. light crude rose 0.2 percent to $37.25 a barrel. Gold hit a one-week high of $389.50 an ounce on the weaker dollar, up from $388.75 in New York trade.///