Asian equities rose on Friday as dismal Chinese manufacturing activity data raised hopes for more stimulus and good U.S. economic data supported the Fed’s hawkish stance.
After hitting the psychologically key barrier of 145 per dollar, Japan’s Finance Minister Shunichi Suzuki again warned against excessive yen weakness, fueling intervention concerns.
Eurostoxx 50, DAX, and FTSE futures showed European stocks would open higher.
In volatile trade, MSCI’s broadest index of Asia-Pacific shares outside Japan (.MIAPJ0000PUS) rose 0.3%, on track to gain slightly over 1% in the first half.
On Friday, investors will watch the Fed’s preferred inflation barometer, the U.S. Personal Consumption Expenditures (PCE) index.
After Thursday’s data revealed German inflation grew more than expected in June, eurozone June inflation statistics may hint at the region’s broader picture.
Reuters economists estimate euro zone inflation to decrease to 5.6% in June from 6.1% in May.
Germany’s harmonized consumer prices grew 6.8% in June, whereas Spain and Italy’s declined considerably.
“There is a growing divergence in the path of inflation across the region, which is leading to some disagreement about the right path for policy,” said Rob Carnell, ING’s regional head of research, Asia-Pacific.
“Though one suspects that the response will be, if in doubt, hike.”
The week’s data showed a strong U.S. economy that calmed recession fears and raised confidence that the Fed would stay hawkish.
Last week, new jobless claims surprisingly decreased, indicating ongoing labor market growth, while first quarter GDP was dramatically revised upward.
On Thursday, Federal Reserve Chair Jerome Powell indicated that the central bank would restart monetary tightening following a respite earlier this month.
Due to robust economic statistics on Thursday, 10-year Treasury rates reached a three-month high of 3.868%. Last at 3.839%.
On Friday, official surveys revealed that China’s industrial activity fell for a third month in June, and other sectors weakened, putting pressure on policymakers to boost development as demand weakens at home and overseas.
On stimulus optimism, China’s blue-chip CSI300 Index (.CSI300) and Shanghai Composite Index (.SSEC) surged over 1%, while Hong Kong’s Hang Seng Index (.HSI) jumped 0.24%.
The yen temporarily traded at 145.07 per dollar, a seven-month low and breaking through the 145 threshold analysts have been watching for intervention.
For the first time in 24 years, officials intervened to support the yen when it broke 145 last September. The dollar last bought 144.67 yen.
“The government is watching currency market moves with great sense of urgency,” Shunichi Suzuki said. “We will respond appropriately if the moves become excessive.”
Market predictions that the Bank of Japan will keep interest rates ultra-low even while other central banks tighten monetary policy to contain inflation are pressuring the Japanese government to defend the yen.
U.S. crude remained at $69.87 a barrel, while Brent rose 0.2% to $74.49.
