Equities in Japan, South Korea and Australia climbed alongside Hong Kong share futures. Gains for Tokyo’s Topix index further eroded the steep declines earlier in the week, helped along by Friday moves in tech and bank stocks.
US equity futures also rose to compound a Thursday rally, when the S&P 500 had its best day since November 2022, while the Nasdaq advanced 3.1%.
The US rally was driven by US jobless claims that showed fewer people applied for unemployment benefits than expected. The data alleviated concerns about the labor market after worse-than-expected jobs data on Friday last week fanned fears of recession that rippled through global markets.
“It has been quite a week,” said Liz Young Thomas at Social Finance Inc. “Up, down, and all around. We learned how sensitive markets now are to cooler US economic data, how broad reaching the impact of the yen carry trade can be, and how conditioned investors are to expect interest rate cuts as the salve for every scrape.”
BloombergShares in Tokyo Electron Ltd. jumped after the company lifted its profit forecast for the fiscal year to March and reported a better-than-expected surge in sales.The yen weakened slightly against the dollar early Friday, on pace for its fourth day of depreciation against the greenback. The weakening removed a headwind for Japanese stocks, which can often fall when the yen rises.Treasuries were mostly steady in Asian trading after declines across the curve Thursday — with the selloff led by shorter maturities. Swap traders further trimmed bets on aggressive Federal Reserve easing in 2024. Cryptocurrencies surged, with investors returning to riskier assets across financial markets. Australian government bonds fell early Friday.
The global repricing has been so sharp that at one point interest-rate swaps implied a 60% chance of an emergency rate cut by the Fed in the coming week — well before its next scheduled meeting in September. Current pricing suggests about 40 basis points of cuts for September.
Despite the expectations of imminent policy easing, there are some holdouts within the central bank itself. Federal Reserve Bank of Kansas City President Jeffrey Schmid signaled he’s not ready to support a reduction in interest rates with inflation above target, according to comments made on Thursday in the US.
BloombergElsewhere in Asia, China inflation and producer prices are due, while money supply and new lending data could be released as soon as Friday. Markets are closed in Singapore.
Soft China inflation figures may fuel demand for government bonds, keeping yields near record lows, Bloomberg Economics noted, adding to speculation that the People’s Bank of China may continue to reduce rates to support the economy.
Oil was little changed following a Thursday rally, against the backdrop of simmering tensions in the Middle East. Gold inched lower after a gain in the prior session.
Meanwhile, steel and aluminum producers in Canada were urging Prime Minister Justin Trudeau’s government to swiftly impose new tariffs on Chinese products, saying metals from the Asian powerhouse are flooding the Canadian market and threatening local jobs.