Asian markets surged to a four-month high on Friday as U.S. economic data fueled views that the Federal Reserve is nearing the end of its rate-hike campaign. The yen dipped after the Bank of Japan maintained its ultra-easy monetary policy.
MSCI’s broadest Asia-Pacific share index outside Japan (.MIAPJ0000PUS) was 0.4% higher and on track for a 2.5% weekly rise, its biggest since January.
However, Eurostoxx 50, DAX and FTSE futures were down 0.09%, 0.04%, and 0.03%, respectively. S&P 500 e-minis lost 0.22%.
After a mid-bank-heavy week, the BOJ pledged to “patiently” sustain enormous stimulus to attain its 2% inflation objective and wage sustainably raises.
The BOJ maintained its -0.1% short-term interest rate target and 0% 10-year bond yield cap under its yield curve control (YCC) policy.
Investors expect Governor Kazuo Ueda’s news conference (0630 GMT) on inflation, policy, and the yen’s continuing losses.
“Comments around FX from Ueda will be key to watch at the press conference given the recent pressure on yen, but my sense is that BOJ will look at that as temporary and is unlikely to react,” said Saxo Markets market strategist Charu Chanana.
The yen fell 0.13% to 140.49 per dollar, below its seven-month low of 141.50 on Thursday. After the BOJ decision, the Nikkei (.N225) recovered.
China’s stock markets rose as the central bank cut its medium-term policy loan rates for the first time in 10 months on Thursday to support a weak economic rebound. Investors expect further stimulus.
The Hang Seng Index (.HSI) rose 0.6%, and China’s CSI 300 Index (.CSI300) rose 0.37%.
After U.S. retail sales and unemployment claims beat expectations in May, the S&P 500 (.SPX) and Nasdaq (.IXIC) soared to their best levels in 14 months.
“If U.S. labour markets are finally starting to soften, this lends some credibility to the Fed’s decision to pause,” said Ryan Brandham, Validus Risk Management’s head of global capital markets in North America.
The flood of data strengthened expectations that the Fed would not raise rates again, as the central bank signaled on Wednesday when it left rates unchanged.
CME FedWatch predicts a 67% possibility of a 25-basis-point rate hike by the Fed next month.
On Thursday, the European Central Bank warned of wage dangers and raised inflation predictions, opening the door for more rate hikes. The ECB boosted interest rates by 25 bps to 3.5%, a 2001 high.
“(ECB President) Lagarde insisted that there was more ground to cover, but the overall tone of the press conference suggested that there might not be a whole lot more to do, despite the upgrade to the inflation forecast,” strategists from NatWest Markets wrote.
The euro traded at $1.0936, near its one-month high from Thursday’s ECB decision. /FRX
The dollar index, which compares the dollar to six major currencies, was 102.24, near its one-month low of 102.08.
Oil prices fell after rising sharply on hopes about greater energy demand from the main oil importer China.
Brent fell 0.22% to $75.50 per barrel, while WTI fell 0.21% to $70.47.
