Asian markets showed resilience on Friday, following a strong recovery on Wall Street and a notable slowdown in inflation in Japan. Tokyo’s Nikkei 225 index saw a solid 1.3% rise, hitting 35,940.50, boosted by declining inflation in Japan for the second consecutive month.
Japan’s annual headline inflation rate, which has remained consistently above the Bank of Japan’s 2% target since April 2022, showed a gradual decline from its peak of 4.3% last year to the last reported rate of 2.6% in December. This drop increases the likelihood that the Bank of Japan will keep its ultra-low interest rates at its next meeting next week.
Instead, Hong Kong’s Hang Seng Index faced its third consecutive week of losses, falling 0.8% to 15,275.00, reflecting investor concerns about the region’s economic outlook. Similarly, the Shanghai Composite Index fell 0.3% to 2,838.89.
However, some markets in the region saw positive momentum. South Korea’s Kospi rose 1.3% to 2,472.74, Australia’s S&P/ASX 200 advanced 1% to 7,421.20 and Taiwan’s Taiex posted a substantial 2.6% gain, with Taiwan Semiconductor Manufacturing Co. contributing to the rise by adding 6.5%.
On the global stage, there was a rebound in the US market on Thursday, with the S&P 500 rising 0.9% to 4,780.94, following two consecutive declines earlier in the week. The Dow Jones Industrial Average gained 0.5% to 37,468.61, and the Nasdaq composite rose 1.3% to 15,055.65.
Big tech stocks played a key role in this recovery, with Apple leading the way, rising 3.3% and reversing its weekly loss into a gain. Chip companies also showed strength, boosted by Taiwan Semiconductor Manufacturing Co.’s upbeat revenue forecast for 2024. Broadcom gained 3.6%, while U.S. shares of TSMC soared 9.8%.
Despite overall market stability, the bond market witnessed a slowdown in Treasury yields, easing concerns that had emerged earlier in the week. The Federal Reserve’s indication of possible rate cuts in 2024 as inflation cooled since the previous summer helped ease pressure on the economy.
The 10-year Treasury yield rose slightly to 4.16% on Friday, up from 4.11% on Wednesday. This move followed a report on Thursday showing a decline in the number of American workers filing for unemployment benefits to its lowest level since two Septembers ago, signaling positive news for the workforce and the broader economy.
While some economic indicators were mixed, with manufacturing in the mid-Atlantic region contracting more than expected, the real estate sector showed resilience. Homebuilders started more projects last month than economists anticipated, although at a weaker level than November’s numbers.
In the financial sector, several companies reported weaker results for the end of 2023 than analysts had predicted. Discover Financial Services saw a 10.8% drop and KeyCorp lost 4.6% after reporting earnings that missed Wall Street forecasts, despite beating revenue expectations. However, Fastenal emerged as a strong performer, jumping 7.2%, with a quarterly profit that exceeded analysts’ expectations.
In energy trading, benchmark U.S. crude added a marginal 3 cents to $73.98 a barrel, while Brent crude, the international standard, fell 16 cents to $78.94 a barrel.
Currency markets saw the US dollar rise to 148.69 Japanese yen from 148.15 yen, and the euro gain ground, costing $1.0880, up from $1.0874. These market movements highlight the intricate dynamics that influence global economies and financial landscapes.
Also read: Wall Street gains momentum on upbeat economic data, Treasury yields rise – Market Insights 2024