Asian share markets recovered on Friday following a turnaround in Wall Street tech stocks, with investors keeping a close eye on the Bank of Japan’s likely interest rate hike.
The central bank is widely expected to raise its policy rate by a quarter point to 0.75 per cent, with markets pricing in a 90 per cent chance.
Analysts say any further tightening could support the struggling yen but add pressure on Japanese government bonds.
Figures released Friday showed Japan’s core CPI rose 3.0 per cent year-on-year in November, unchanged from the previous month.
Analysts at CBA noted that “core inflation has remained above the BOJ’s 2 per cent target in the past two years, and the sharp weakening of the yen in the past two months will also add to inflation.”
Meanwhile, US inflation slowed unexpectedly in November, with the Consumer Price Index rising 2.7 per cent against forecasts of 3.1 per cent. While analysts warned the figures were distorted by the recent government shutdown, the data provided a mild boost to sentiment.
Pricing for the Federal Reserve suggested only a 27 per cent chance of a rate cut in January, with March nudging up to 58 per cent from 54 per cent.
Regional indices followed Wall Street’s lead. Japan’s Nikkei rose 0.6 per cent, South Korea climbed 1.2 per cent buoyed by strong results from chipmaker Micron Technology, and MSCI’s broadest Asia-Pacific index outside Japan added 0.2 per cent. S&P 500 and Nasdaq futures were flat after bouncing overnight.
In bonds, 10-year US Treasury yields held at 4.126 per cent, while Japan’s 10-year yield matched a recent 18-year high at 1.980 per cent. European bond markets reacted to central bank moves with caution.
The Bank of England cut rates in a tight 5-4 vote but signalled a cautious outlook for future easing. The European Central Bank held rates at 2.0 per cent, hinting that the easing cycle is likely over. Central banks in Sweden and Norway also stayed on hold.
Currencies were mostly steady. Sterling hovered at $1.3378, the euro was at $1.1725, and the dollar was unchanged at 155.60 yen.
Commodities saw mixed moves. Gold remained at $4,333 an ounce, below its October peak, while silver faced profit-taking. Palladium and platinum stayed in demand.
Oil prices were supported by potential US sanctions on Russia and supply risks from Venezuelan tanker blockades. Brent rose 0.2 per cent to $62.04 per barrel, and US crude gained 0.2 per cent to $58.35.
Reuters
