Asian stocks gain after US inflation data, but US shutdown risks loom

Most Asian stock markets advanced on Monday, tracking Wall Street’s rebound after US inflation data came in line with expectations, easing investor concerns over former President Donald Trump’s latest tariff measures.

Gains in Hong Kong and Seoul led the rally, with both rising more than one percent. Shanghai, Sydney, Singapore, Wellington, Manila, and Jakarta also posted increases. Tokyo, however, slipped, though shares in Sony’s financial unit surged more than 30 percent on debut after being spun off to concentrate on entertainment and image sensors. Sony Financial Group opened at 150 yen and jumped as high as 210 yen in early trade.

The positive momentum followed Wall Street’s strong close on Friday, which snapped a three-day losing streak. The Federal Reserve’s preferred inflation gauge, the personal consumption expenditures (PCE) index, rose 2.7 percent in August, slightly above July’s 2.6 percent and well over the Fed’s 2 percent target. Still, the figure matched expectations, offering the central bank room to continue rate cuts as it shifts focus toward supporting the labor market amid a run of weak jobs data.

The Fed delivered its first rate cut since December earlier this month, and markets are anticipating two more before January. Attention now turns to Friday’s non-farm payrolls (NFP) report, a key indicator for U.S. employment trends.

However, uncertainty over a possible U.S. government shutdown this week is clouding the outlook. Lawmakers remain deadlocked over a funding deal ahead of Tuesday’s deadline, raising concerns that critical economic data releases, including the NFP report, could be delayed.

Democratic leaders voiced cautious optimism over the weekend. House leader Hakeem Jeffries said he was “hopeful” for an agreement, while Senate leader Chuck Schumer noted progress would hinge on cooperation from Republicans. Trump, meanwhile, has remained defiant, canceling a scheduled meeting with opposition leaders last week. That meeting is now set to take place Monday.

“If we hear early this week that the NFP report will be delayed (potentially until the government reopens), traders may recalibrate their approach to risk,” said Chris Weston of Pepperstone. Bank of America economists added that while the immediate impact of a shutdown is usually modest, a prolonged standoff could cause deeper damage, particularly if federal layoffs occur.

Meanwhile, oil prices retreated on speculation that OPEC+ may boost production, reviving fears of a supply glut. The drop came after last week’s rally, which was fueled by geopolitical tensions between NATO and Russia and the threat of further sanctions on Moscow.

Key figures at around 0230 GMT

Tokyo - Nikkei 225: DOWN 1.0 percent at 44,892.52 (break)
Hong Kong - Hang Seng Index: UP 1.5 percent at 26,506.83
Shanghai - Composite: UP 0.1 percent at 3,833.33
Euro/dollar: UP at $1.1725 from $1.1701 on Friday
Pound/dollar: UP at $1.3431 from $1.3405
Dollar/yen: DOWN at 148.96 yen from 149.51 yen
Euro/pound: DOWN at 87.28 pence from 87.30 pence
West Texas Intermediate: DOWN 0.8 percent at $65.19 per barrel
Brent North Sea Crude: DOWN 0.7 percent at $69.65 per barrel
New York - Dow: UP 0.7 percent at 46,247.29 (close)
London - FTSE 100: UP 0.8 percent at 9,284.83 (close)