Asian shares were mostly higher on Thursday after US shares rose to records on hopes that inflation is heading back in the right direction.
The optimism came from a report showing that US consumers in April had to pay prices for gasoline, car insurance and everything else, which were a total of 3.4% higher than a year earlier, less than March's inflation rate of 3.5 %.
The slowdown came as a relief after consumer price index (CPI) figures earlier this year consistently came in worse than expected. Wednesday's report built on expectations that the Federal Reserve could cut its key interest rate this year, which is the biggest concern for most investors.
In Asian trading, Tokyo's Nikkei 225 index rose 1.4% to 38,920.26, even after the government reported Japan's economy shrank 2% annually in the January-March quarter.
Hong Kong's Hang Seng index rose 1.5% to 19,355.77. The Shanghai Composite index fell 0.1% lower to 3,118.40.
In Australia the S&The P/ASX 200 rose 1.7% to 7,881.30, while South Korea's Kospi rose 0.8% to 2,753.00.
Taiwan's Taiex rose 0.7% and India's Sensex gained 0.2%.
On Wednesday the S&The P500 rose 1.2% to its previous high from a month and a half ago to close at 5,308.15. The Dow Jones Industrial Average rose 0.9% to 39,908.00, and the Nasdaq rose 1.4% to 16,742.39, adding to its own record high set a day earlier.
Stocks that typically benefit the most from lower interest rates have led the market. Homebuilders benefited from hopes that Fed cuts could lead to lower mortgage rates, with Lennar, DR Horton and PulteGroup all up more than 5%. Big Tech and other high-growth stocks also rode the wave of expectations for lower interest rates, and Nvidia's 3.6% gain was the strongest force driving the S&P500 upwards.
Real estate shares in the S&The P 500 rose 1.7%, while shares of electric companies and other utilities rose 1.4%. The dividends they pay look better to investors if bonds pay less interest.
On Wall Street, Petco Health + Wellness helped lead the market after surging 27.9%. It appointed Glenn Murphy, CEO of investment firm FIS Holdings, as executive chairman.
On the losing side were GameStop and AMC Entertainment, as momentum reversed after their breathtaking start to the week. GameStop fell 18.9%, but is still up 126.5% year to date.
AMC Entertainment fell 20% after it said it would issue nearly 23.3 million shares of its stock to wipe out $163.9 million in debt.
A separate report on Wednesday showed no growth in spending at US retailers in April compared to March. Economists had expected growth of 0.4%.
Slowing retail sales can be seen as positive for markets as they can reduce upward pressure on inflation. But weaker US consumer spending would erode one of the key pillars keeping the economy out of recession. The pressure has become especially great on lower-income households.
On the bond market, the yield on ten-year government bonds fell from 4.45% at the end of Tuesday to 4.34%. The two-year yield, which moves more narrowly as the Fed takes action, fell to 4.72% from 4.82%.
Traders now predict a nearly 95% probability that the Fed will cut its key interest rate at least once this year, according to data from CME Group. That's an increase from just under 90% the day before.
In other trading early Thursday, U.S. benchmark crude rose 32 cents to $78.92 a barrel in electronic trading on the New York Mercantile Exchange. On Wednesday the price rose by 61 cents.
Brent crude, the international standard, rose 30 cents to $83.05 a barrel.
The US dollar fell from 154.88 yen to 154.21 Japanese yen. The euro rose from $1.0885 to $1.0879.
