Stocks Extend Rally, Yen Gains as BOJ Holds Rate: Markets Wrap

By Investor Empires On Sep 20, 2024

(Bloomberg) — Asian shares extended a rally in global equity markets after jobs data supported the view that the U.S. economy is headed for a soft landing. The yen rose after the Bank of Japan left interest rates unchanged.

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MSCI Asia Pacific Index rose as shares in Japan, South Korea and Australia advanced, while Chinese shares fell. The global stock index hit a fresh peak alongside U.S. stocks on Thursday.

The Bank of Japan kept its monetary policy steady on Friday, signaling it sees no need to rush to raise interest rates as it monitors financial markets after a July hike and hawkish views that have unnerved investors. Data earlier showed the country’s core inflation rate accelerated for a fourth straight month in August.

“The focus now shifts to BOJ Governor Ueda’s press conference,” said Shoki Omori, chief desk strategist at Mizuho Bank in Tokyo. “Depending on the tone of that, if the hawkish stance is clearly conveyed to the market, the USD/JPY exchange rate is expected to head lower.”

Treasury yields were little changed on Friday, while the dollar strength index remained rangebound.

The number of U.S. jobless claims fell to their lowest level since May, suggesting the labor market remains healthy despite a slowdown in hiring. That added to risk appetite and eased concerns that the Federal Reserve may have been too slow to lower borrowing costs when it cut interest rates by a half percentage point on Wednesday.

Stocks’ gains on Thursday and Friday point to a “belated euphoric reaction” to the Fed, but that could ease, according to Nick Ferris, chief investment officer at Singapore-based Vantage Point Asset Management. “Valuations are already heroic and risk compensation is weak, especially if the earnings cycle disappoints.”

In China, the country is considering removing some of the biggest remaining restrictions on home purchases after previous measures failed to revive a moribund housing market, according to people familiar with the matter. That’s sent the BI China Real Estate Owners and Developers Valuation Peer Group Index higher.

Meanwhile, national banks kept their benchmark interest rates unchanged for September, as policymakers held off on further monetary stimulus as financial institutions struggle with record-low profit margins. The Securities Times reported on Friday that the Federal Reserve’s rate cut this week has given China room to ramp up monetary and fiscal stimulus to support the economy.

The European Union and China have agreed to intensify discussions to avoid imminent tariffs on electric cars before a deadline that is just days away.

Elsewhere, Wall Street banks are divided over the pace and extent of the Fed’s next rate cuts. JPMorgan Chase & Co. expects another 50 basis point cut in November, while Goldman Sachs expects 25 basis point cuts at each meeting from November to June next year.

In Asia, Taiwan’s real estate and construction stocks fell on Friday after the central bank decided to increase the amount of money banks must hold in reserve to cool the raging property market.

The dataset for publication includes Hong Kong’s inflation rate and India’s foreign exchange reserves.

In commodities, gold held near a record high while oil was on track for its biggest weekly advance since April after U.S. interest rate cuts.

Main events this week:

Japan Interest Rate Decision, Friday
Eurozone Consumer Confidence, Friday
Canada Retail Sales, Friday

Some key movements in the markets:

Stocks

S&P 500 futures were down 0.1% as of 12:52 p.m. in Tokyo.
Nikkei 225 (OSE) futures rose 2%.
Japan’s Topix index rose 1.4%.
Australia’s S&P/ASX 200 rose 0.4%
Hong Kong’s Hang Seng Index rose 1.3%.
The Shanghai Composite Index fell 0.2%.
Euro Stoxx 50 futures fell 0.2%
Nasdaq 100 futures fell 0.2%.

Currencies

The Bloomberg Dollar Index was little changed.
The euro was little changed at $1.1165.
The Japanese yen rose 0.3% to 142.16 yen per dollar.
The offshore yuan rose 0.3% to 7.0453 against the dollar.
The Australian dollar was little changed at $0.6819.

Cryptocurrencies

Bitcoin rose 0.8% to $63,565.84
Ether rose 1.1% to $2,493.88

Bonds

The yield on the 10-year US Treasury note was little changed at 3.71%.
The yield on the 10-year Japanese bond was unchanged at 0.850%.
The yield on the 10-year Australian bond was little changed at 3.92%.

Goods

West Texas Intermediate crude was little changed.
Spot gold rose 0.2 percent to $2,592.04 an ounce.

This story was produced with the help of Bloomberg Automation.

–With assistance from Winnie Hsu.