* MSCI Asia ex Japan + 0.18%, Nikkei -0.11%
* US yields hit three-month lows
* Inflation data in the United States support the “transitory” thesis
* The dollar eases as US yields fall; or higher
By Andrew Galbraith
SHANGHAI, June 11 (Reuters) – US bond yields fell to their lowest level in three months and a large measure of Asian stocks rose on Friday as investors saw enough one-off factors in consumer price data Americans to support the Federal Reserve’s belief that the rise in inflation will be transitory.
Some economists say the rise in the CPI reflects short-term adjustments linked to a reopening of the economy, and many investors seem convinced that the Fed is skillfully managing a rebound in economic growth – although questions remain about its definition of “transient”.
Overnight data showed that the US consumer price index recorded its biggest year-on-year increase at 5% since August 2008, after rising 4.2% in April. However, short-term increases in the prices of airline tickets and used cars contributed significantly, raising doubts about underlying inflationary pressures.
At the same time, data from the US Department of Labor also showed the lowest level of new jobless claims in nearly 15 months last week.
In morning trading in Asia, the largest MSCI index of Asia-Pacific stocks outside of Japan rose 0.18%. The Japanese Nikkei ditched its initial gains to fall 0.11%.
“Last night’s impression is just one part of a long line of evidence that inflation isn’t just rising, but more than just transient base effects,” said Rob Carnell, Chief Asia-Pacific Economist at ING in Singapore.
“But the Fed, which is meeting next week, can still say there is no deviation from inflation expectations to support its continued transient inflation mantra.
Seoul’s Kospi rose 0.32%, Australian stocks added 0.14% and Hong Kong’s Hang Seng index gained 0.53%. Blue-chip Chinese stocks fell more than 1% as consumer staples companies retreated after two days of gains.
Overall credit growth in China continued to slow in May as the country’s central bank seeks to contain rising debt in the world’s second-largest economy.
“Due to the very strong external demand, the negative impact of the credit deceleration is expected to be correct over the next three to six months, mainly thanks to strong demand from the United States,” said Larry Hu, economist at Macquarie in Hong Kong.
“(But) once US demand returns to normal, I think the Chinese economy will suffer more from the credit crunch.”
US stocks hit record highs on Thursday, with the S&P 500 gaining 0.47% to an all-time high of 4,239.18. The Dow Jones Industrial Average rose 0.06% and the Nasdaq Composite rose 0.78%.
The yield on the 10-year US Treasury bill dipped to a three-month low of 1.4340%, down from Thursday’s close of 1.459%. The 30-year rate was 2.1270%, its lowest level since February 26.
The spread between 2-year and 10-year rates also reached its lowest level since late February, as inflation expectations eased.
The dollar fell as yields fell, with the greenback index declining 0.06% to 90.018. The euro gained 0.12% to $ 1.2183, but the Japanese yen weakened to 109.40 per dollar.
Hopes of strong economic demand in the wake of the U.S. jobless claims report lifted oil prices to two-year highs on Thursday. In Asian trading, global benchmark Brent crude was last at $ 72.36 a barrel, down 0.22% on the day, and US West Texas Intermediate crude fell 0.26% to 70.11 $ per barrel.
Spot gold climbed 0.07% to $ 1,899.39 an ounce on a weaker dollar.
(Report by Andrew Galbraith edited by Shri Navaratnam)