SYDNEY: Asian share markets rebounded on Friday as a turnaround in tech lifted Wall Street, leaving investors counting down to a likely hike in interest rates from the Bank of Japan that could cause waves for currencies and bonds.
Sentiment also got a boost from a shock slowdown in US consumer price inflation to 2.7 percent, though analysts cautioned the data were clearly distorted lower by the government shutdown and could not be taken at face value.
Pricing for the Federal Reserve moved only marginally with a rate cut in January implied at just 27 percent, while March nudged up to 58percent from 54 percent before the data.
Markets imply around a 90percent chance the BOJ will raise its rate a quarter point to 0.75percent later Friday, with much resting on the outlook for further tightening ahead.
Investors are wagering on just one further move to 1.0 percent in 2026 and any hint of more could offer much-needed support to the embattled yen, but also pile pressure on government bonds.
“The policy rate is still in stimulatory territory and there is a case for further BOJ policy normalisation,” argued analysts at CBA in a note. “Core inflation has remained above the BOJ’s 2percent target in the past two years, and the sharp weakening of the yen in the past two months will also add to inflation.”
Figures out Friday showed Japan’s core CPI rose at an annual pace of 3.0percent in November, unchanged from the previous month. For now markets were content to follow Wall Street’s lead and Japan’s Nikkei rose 0.6percent. South Korea climbed 1.2 percent encouraged by stellar results from chipmaker Micron Technology. MSCI’s broadest index of Asia-Pacific shares outside Japan added 0.2 percent.
ECB, BoE OFFER DIFFERENT LEVELS OF HAWKISHNESS S&P 500 futures and Nasdaq futures were flat after bouncing overnight.
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