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(Bloomberg) — Stocks in Asia were headed for early gains after a tech rally lifted Wall Street as traders looked beyond elevated core US inflation to imminent rate cuts next week.

Equity futures for Japan, Australia and Hong Kong all advanced, with gauges in Tokyo partly reflecting strength in the yen. The Japanese currency climbed as high as 140.71 per dollar on Wednesday, wiping out its losses for the year. The S&P 500 closed 1.1% higher, while the Nasdaq 100 rose 2.2%. Nvidia Corp. gained 8.2% as chipmakers rallied.

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Treasury 10-year yields rose one basis point to 3.66% Wednesday and swaps market pricing cemented expectations for a 25 basis-point Federal Reserve rate cut when the central bank meets next week. Once the Fed begins lowering borrowing costs, the debate will center around the pace of subsequent easing.

The so-called core consumer price index — which excludes food and energy costs — increased 0.3% from July, the most in four months, and 3.2% from a year ago, Bureau of Labor Statistics figures showed Wednesday. The three-month annualized rate advanced 2.1%, picking up from 1.6% in July, according to Bloomberg calculations.

“This isn’t the CPI report the market wanted to see,” said Seema Shah at Principal Asset Management. “The number is certainly not an obstacle to policy action next week, but the hawks on the committee will likely seize on today’s CPI report as evidence that the last mile of inflation needs to be handled with care and caution.”

An index of the dollar fell Wednesday. Oil climbed as Hurricane Francine ripped through key oil-producing zones in the US Gulf of Mexico, prompting traders to cover bearish bets.

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Bank of Japan policy board member Naoki Tamura is due to speak Thursday. On Wednesday, another board member Junko Nakagawa said the central bank will continue to adjust policy provided the economy performs in line with projections in comments that sent the yen higher.

Elsewhere in Asia, data set for release includes producer prices in Japan and Hong Kong, inflation and industrial production in India and a rate decision in Pakistan. 

US Rates

Whether the economy is entering a soft landing that only requires a series of modest rate cuts, or heading for a harder landing at some stage in the next year is the biggest conundrum for investors. Currently, Fed swaps are pricing in over 140 basis points of rate cuts by the Jan. 29 rate decision, equivalent to roughly two half-point moves over the next four gatherings barring no intra-meeting event.

“The firmer-than-expected core inflation print will make it harder for Jerome Powell to deliver a 50 basis-point cut in September,” said Krishna Guha at Evercore. “We continue to think a starter 50 basis-point cut is the right play and might even now win out. But the odds have moved against this, and risks to markets and the soft landing are higher as a result.”

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Guha noted that if the Fed doesn’t cut rates by 50 basis points next week, it will possibly do that in November.

In corporate news, OpenAI is in talks to raise $6.5 billion from investors at a valuation of $150 billion, according to people familiar with the situation. Nvidia Corp. Chief Executive Officer Jensen Huang, said the limited supply of their products has frustrated some customers and raised tensions.

Key events this week:

• Japan PPI, Thursday
• ECB rate decision, Thursday
• US initial jobless claims, PPI, Thursday
• Eurozone industrial production, Friday
• Japan industrial production, Friday
• U. Michigan consumer sentiment, Friday

Some of the main moves in markets:

Stocks

• Nikkei 225 futures rise 2.1% as of 6:51 a.m. Tokyo time
• Hang Seng futures rose 0.6%
• S&P/ASX 200 futures rose 0.6%

Currencies

• The Bloomberg Dollar Spot Index fell 0.1%
• The euro was little changed at $1.1013
• The Japanese yen was little changed at 142.31 per dollar
• The offshore yuan was little changed at 7.1274 per dollar

Cryptocurrencies

• Bitcoin fell 0.1% to $57,411.14
• Ether was little changed at $2,346.95

Commodities

• Spot gold was little changed

This story was produced with the assistance of Bloomberg Automation.

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