Tokyo, Japan – Asian shares surged on Thursday, buoyed by the optimism in the market following the record-breaking rally of U.S. stocks. The surge was driven by hopes that inflation was moving in a positive direction, alleviating concerns about rising prices.

A report revealed that U.S. consumers experienced a 3.4% increase in prices for gas, car insurance, and other essentials in April compared to a year earlier. While this is still a significant rise, it was an improvement from the 3.5% inflation rate observed in March, offering some relief to investors.

The news of slowing inflation came as a welcome reprieve after reports earlier this year consistently showed higher-than-expected consumer prices. The data fueled expectations that the Federal Reserve might cut its main interest rate, a development closely watched by investors.

In Asian trading, Tokyo’s Nikkei 225 index saw a gain of 0.8%, despite the announcement that the Japanese economy had contracted at a 2% annual rate in the January-March quarter. Other markets in the region also saw positive movement, with Hong Kong’s Hang Seng index rising by 1.6% and Australia’s S&P/ASX 200 advancing by 1.6%.

Stock market indices in South Korea, Taiwan, and India also posted gains, reflecting the overall positive sentiment in the Asian markets. The upward trend was further boosted by the performance of U.S. stocks, which saw the S&P 500, Dow Jones Industrial Average, and Nasdaq closing at record highs.

The rally in U.S. stocks was driven by expectations of lower interest rates, benefiting sectors like homebuilders and big tech companies. The prospect of easier mortgage rates led to gains for companies like Lennar, D.R. Horton, and PulteGroup, while tech giant Nvidia saw a significant increase in its stock.

Meanwhile, real estate and utility stocks also saw gains as investors looked for alternatives to bonds in a low-interest environment. However, not all stocks fared well, with GameStop and AMC Entertainment experiencing declines following their recent surge.

The bond market also saw some movement, with the yield on the 10-year Treasury easing, indicating market expectations of Fed action on interest rates. Traders are now predicting a high probability of a rate cut by the Fed this year, reinforcing the positive outlook for the markets.

In early trading on Thursday, U.S. benchmark crude oil prices rose, reflecting the overall positive sentiment in the markets. The international standard, Brent crude, also saw an increase, signaling a positive outlook for the energy sector.

Overall, the upbeat mood in the markets was driven by a combination of factors, including the easing of inflation concerns, expectations of Fed rate cuts, and positive movements in key sectors. These developments painted a promising picture for investors as they navigated the ever-changing landscape of the global markets.