Thursday saw most markets edging down following forecast-topping US inflation, which dashed hopes for a June interest rate cut and prompted traders to reassess monetary policy expectations. The disappointing data sent all three main indexes on Wall Street deep into the red. Asian markets initially followed suit, with Hong Kong, Tokyo, Sydney, Singapore, Wellington, Taipei, Bangkok, and Manila slipping, while Shanghai and Seoul edged up.

London remained flat in the morning, while Paris dipped and Frankfurt rose slightly. Tony Sycamore of IG Australia noted that the fallout from the higher-than-expected US inflation would impact regional equity markets. He mentioned that weakness in key Asian currencies like the yen and the won could provide support for exporters.

The losses in the markets mirrored a sell-off on Wall Street and led to the dollar reaching a 34-year high against the yen, sparking speculation that Japanese authorities might intervene to support their currency. The US consumer price index rising 0.4 percent on-month and 3.5 percent on-year for the third consecutive month suggested a worrying trend rather than a temporary blip.

This inflationary pressure, combined with other positive economic data such as a forecast-beating jobs report, indicated that the US economy was robust despite high borrowing costs and inflation above target. The Federal Reserve officials, who had previously hinted at three rate cuts this year, now faced uncertainty about the timing and number of cuts.

Some analysts, like Torsten Slok of Apollo Global Management, believed that the Fed would not cut rates in 2024. Lawrence Summers, former Treasury Secretary, cautioned that the next rate move might be upwards. However, minutes from the Fed's recent meeting indicated that while some members were concerned about inflation, they still anticipated rate cuts this year.

Neil Wilson of Finalto pointed out that despite the high inflation numbers, there were still reasons for the Fed to consider a rate cut in June. Investors closely monitored the dollar's surge against the yen, with Tokyo authorities expressing readiness to support their currency. Analysts attributed the dollar's strength more to the US data than speculative trading.

In summary, global equity markets responded to the US inflation data with caution, with some indexes slipping while others edged up slightly. The dollar's significant appreciation against the yen raised concerns, prompting speculation about potential intervention by Japanese authorities. Despite the inflationary pressures, the Fed remained divided on the timing and necessity of rate cuts, reflecting the uncertainty prevailing in financial markets.

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