Feb 9, 2024: Japanese stocks reached their highest level in 34 years on Friday, as global equities eyed a potential third consecutive week of gains. Meanwhile, developments in interest rate expectations pushed the yen to its lowest level in over two months, while the Australian and New Zealand dollars saw divergent movements.
In China, mainland markets remained closed, and trading in Hong Kong was thin, with the Hang Seng index down 0.8%. Investors were nervous amid concerns that authorities might not follow through on promises to provide support, particularly as the new Lunar New Year began against a backdrop of subdued sentiment.
The index had dropped 29% during the previous zodiac year of the rabbit, and as the dragon year commenced, sentiment toward China remained pessimistic, with hopes pinned on potential support measures to be announced during the holiday period.
“I am betting that decisive action is happening,” said Chi Lo, senior markets strategist for Asia Pacific at BNP Paribas Asset Management. “But it is a leap of faith, so to speak, because the Chinese government has made too many promises, and the market and investors have been frustrated by the lack of follow-up… so we do need to see Beijing come up with concrete measures.”
While MSCI’s broadest index of Asia-Pacific shares outside Japan fell by 0.3%, it still managed to post a weekly gain. In contrast, Japan’s Nikkei rose by 0.3%, buoyed by a weaker yen, which traded at its lowest level against the dollar in over two months.
SoftBank led gains in Tokyo with a 10% rise after swinging to profit, while Nissan shares tumbled nearly 12% following the automaker’s downward revision of its outlook due to slumping sales in China.
In Australia, shares of building-materials maker Boral surged more than 8% to a record high on the back of margin improvement.
Oil prices remained supported, with Brent crude futures trading at $81.46 a barrel, on track for a weekly gain of over 5%, driven by geopolitical tensions in the Middle East.
Bond markets experienced pressure this week following strong jobs data and comments from central banks indicating reluctance to cut rates. Australia’s central bank cautioned about meeting its inflation target, leading markets to recalibrate rate cut expectations and sending the Australian dollar lower for the sixth consecutive week.
Across the Tasman Sea, the likelihood of further rate hikes from the Reserve Bank of New Zealand diminished after ANZ called for two additional rate rises, shifting market expectations for the upcoming policy meeting.
In the United States, inflation revisions due later on Friday will be closely watched for any signs that market assumptions about receding inflation need adjustment.