(Bloomberg) — Asian stocks extended a rally in global equities as jobs data backed the view that the US economy is headed for a soft landing. The yen edged higher before a Bank of Japan policy decision.
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Equities advanced in Japan and Australia, while Hong Kong share futures also climbed. A gauge of global stocks set a fresh peak alongside US shares Thursday. Treasury yields were little changed in early trade Friday while an index of dollar strength was locked in a narrow range.
A drop in US jobless claims to the lowest since May signaled the labor market remains healthy despite a slowdown in hiring. This added a boost to risk appetite and eased concerns the Fed may have been too slow to trim borrowing costs when it cut rates by half a percentage point on Wednesday.
The equity gains on Thursday and Friday mark a “delayed euphoric reaction,” to the Fed but one that may retreat, according to Nick Ferres, Chief Investment Officer of Singapore-based Vantage Point Asset Management. “Valuation is already heroic and risk compensation is poor, particularly if the earnings cycle disappoints.”
Over in Japan, a policy decision is due where the central bank is widely expected to hold its benchmark interest rate steady, leaving traders on watch for any clues regarding the prospects of a hike later this year. The nation’s key inflation gauge accelerated in August for a fourth consecutive month, according to the Ministry of Internal Affairs Friday.
The Fed has been a dominant factor for the Japanese currency and this was on display again with the yen whipsawing during US trading on Wednesday after the Fed cut rates and then cautioned that such a move shouldn’t be seen as a new pace of policy easing.
Despite the prospect of further Fed cuts and BOJ hikes in the coming months, the yen may fall further against the greenback, according to Mitul Kotecha, head of FX and emerging markets macro strategy Asia for Barclays.
“What we have seen is the dollar tends to weaken ahead of the Fed’s first rate cut and then stabilize and strengthen thereafter,” he said on Bloomberg Television.
Over in China, banks maintained their benchmark lending rates for September, as policymakers held off on further monetary stimulus while financial institutions struggle with record-low profit margins. Stocks are in focus after the Golden Dragon index of US-listed Chinese companies rallied 4.2% on Thursday.
The European Union and China agreed to intensify discussions to avert looming tariffs on electric cars ahead of a deadline that’s only days away. The Securities Times reported on Friday that this week’s Fed rate cut has provided room for China to increase monetary and fiscal stimulus to support the economy.
Elsewhere in Asia, data set for release include inflation for Hong Kong and foreign exchange reserves for India.
In commodities, gold steadied near a record high while oil was on track for the biggest weekly advance since February after the US rate cut.
Key events this week:
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Japan rate decision, Friday
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Eurozone consumer confidence, Friday
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Canada retail sales, Friday
Some of the main moves in markets:
Stocks
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S&P 500 futures fell 0.2% as of 9:57 a.m. Tokyo time
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Hang Seng futures rose 0.7%
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Japan’s Topix rose 1.5%
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Australia’s S&P/ASX 200 rose 0.6%
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Euro Stoxx 50 futures fell 0.2%
Currencies
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The Bloomberg Dollar Spot Index was little changed
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The euro was little changed at $1.1161
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The Japanese yen rose 0.1% to 142.45 per dollar
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The offshore yuan was little changed at 7.0681 per dollar
Cryptocurrencies
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Bitcoin fell 0.4% to $62,816.27
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Ether fell 0.7% to $2,449.25
Bonds
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The yield on 10-year Treasuries was little changed at 3.71%
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Japan’s 10-year yield was unchanged at 0.850%
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Australia’s 10-year yield declined one basis point to 3.92%
Commodities
This story was produced with the assistance of Bloomberg Automation.
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