Most Asian stocks rose on Friday, tracking gains on Wall Street overnight, as investors welcomed a major interest rate cut by the Federal Reserve.
Japanese stocks outperformed their regional peers, but pared early gains after the Bank of Japan kept interest rates steady but said it expected inflation to continue rising.
Chinese stocks fell after the People’s Bank of China kept its benchmark lending rate unchanged despite growing calls for more stimulus.
Regional markets benefited from Wall Street’s positive performance, with the US dollar index hitting record highs after the Federal Reserve cut interest rates by 50 basis points and launched an easing cycle.
Gains in technology stocks were the main driver of the trade, with buying moving into Asian markets. But U.S. stock index futures fell in Asian trading, amid signs that the wave of interest rate cuts is now easing.
Japanese stocks trim early gains after BOJ decision
Japan’s benchmark index was the best performer in Asia for the second straight session, rising 1.8%, while the broader index added 1.5%. Both indexes pared some early gains after the BOJ decision.
The Bank of Japan made a unanimous decision, in line with market expectations. But while the central bank did not give any explicit hawkish signals, it did signal expectations of a steady increase in consumer price index inflation.
Expectations of higher inflation have been a key driver of the Bank of Japan’s interest rate hikes — which it has done twice this year. The central bank expects inflation to rise as private consumption improves.
Data released earlier on Friday showed inflation rose to a 10-month high in August, bolstering the Bank of Japan’s stance.
But the inflation reading also pointed to steady improvement in Japan’s economy, especially as private consumption benefited from massive wage hikes passed earlier this year.
Chinese stocks fall after PBOC keeps interest rates unchanged
Chinese stocks fell slightly on Friday, lagging regional peers as a recovery from seven-month lows faded.
Sentiment towards China was further hurt by the People’s Bank of China keeping interest rates unchanged, despite growing calls from Beijing for more stimulus measures.
The People’s Bank of China unexpectedly cut its deposit rate in July, sending it to a record low to ease domestic monetary conditions. But a raft of recent economic readings have shown little improvement in China, where weak consumer spending and widespread deflation persist.
However, the Hong Kong index outperformed the gains made by technology stocks, rising 1.3%.
Gains in the technology sector also helped South Korea’s stock index, which rose 0.8%.
Broader Asian markets welcomed the US rate cut, as looser monetary conditions free up more liquidity for investment in risk-driven markets.
The Australian index rose 0.3% and hit a record high of 8,246.20 points earlier in the session.
India’s index futures pointed to a quiet open, after the index hit a record high in the previous session.