Asian markets rose on Friday as a below-forecast read on US inflation boosted hopes for another interest rate cut next month, while blockbuster earnings from chip firm Micron helped soothe nerves over a tech bubble.
The yen fell against the dollar after the Bank of Japan (BoJ) hiked its own borrowing costs to a three-decade high, hours after data showed prices continued to rise more than preferred.
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A tough week for global equities looked to be heading for a positive end after figures showed US inflation slowed last month to its lowest level since July and was well below forecasts.
The reading provided a sliver of light for rate cuts, after traders pared their bets on a fourth successive reduction in January following the Federal Reserve’s policy decision last week.
Markets see a 20 per cent chance of a cut next month, though they see two by the end of 2026, according to Bloomberg News.
However, analysts said disruptions to data collection during the longest-ever US government shutdown, which ended in mid-November, had likely distorted the figures.
Economists at Bank of America warned that “we recommend taking (the) report with a large grain of salt,” citing “shutdown-related distortions”.
Still, the news helped lift all three main indexes on Wall Street, which have come under pressure in recent weeks amid questions about when, if ever, investors will see returns on the colossal amounts of cash that have been pumped into artificial intelligence (AI).
That has led to speculation about a bubble in the tech sector — which has led the equity surge to record highs this year — that could pop soon.
Those concerns, though, were tempered Thursday after blowout earnings from chip company Micron Technology, which said quarterly profits nearly tripled to $5.2 billion as it benefits from the AI boom.
It also gave an upbeat outlook for the current three months.
The positive lead from Wall Street was picked up by Asia, where Tokyo added one percent while Hong Kong, Shanghai, Sydney, Seoul, Singapore, Taipei, Mumbai, Bangkok, and Wellington were all up.
London and Paris fell at the open, while Frankfurt was flat.
The BoJ lifted borrowing costs to their highest level since 1995, hours after news that inflation held steady at three percent in November, well above its target of two percent.
The yen retreated to as much as 156.71 per dollar — from 155.86 late Thursday — before recovering to around 155.90.
Yields on 10-year Japanese government bonds hit a 26-year high. They have been on the rise in recent weeks on worries about Prime Minister Sanae Takaichi’s budget discipline, while the yen has weakened.
Takaichi, who took power in October, has promised to fight inflation as a major priority.
While the Japanese currency remains under pressure, observers see it strengthening as the Fed cuts rates at the same time the BoJ lifts them.
“As the BoJ proceeds with measured rate increases while the Fed implements one to two cuts, the yield gap that has long supported dollar strength will continue tightening.
“This convergence should exert sustained downward pressure on (the dollar against the yen) throughout the year,” wrote IG market analyst Fabien Yip.
Key Figures At Around 0815 GMT
Tokyo – Nikkei 225: UP 1.0 per cent at 49,507.21 (close)
Hong Kong – Hang Seng Index: UP 0.8 per cent at 25,690.53 (close)
Shanghai – Composite: UP 0.4 per cent at 3,890.45 (close)
London – FTSE 100: DOWN 0.2 per cent at 9,822.64
Dollar/yen: UP at 156.68 yen from 155.63 yen on Thursday
Euro/dollar: DOWN at $1.1720 from $1.1721
Pound/dollar: DOWN at $1.3364 from $1.3378
Euro/pound: DOWN at 87.58 pence from 87.62 pence
West Texas Intermediate: DOWN 0.3 per cent at $55.99 per barrel
Brent North Sea Crude: DOWN 0.3 per cent at $59.67 per barrel
New York – Dow: UP 0.1 per cent at 47,951.85 (close)
AFP
