(Bloomberg) -- Asian stocks extended a rally in global equities as jobs data backed the view that the US economy is headed for a soft landing. The yen edged lower before a Bank of Japan policy decision.
Equities opened higher in Japan and Australia, while Hong Kong share futures also climbed. A gauge of global stocks set a fresh peak alongside US shares Thursday. The S&P 500 rose 1.7% and the Nasdaq 100 added 2.6%.
Treasury yields were little changed in early trade while an index of dollar strength edged higher.
A drop in US jobless claims to the lowest since May signaled the labor market remains healthy despite a slowdown in hiring. This added a boost to risk appetite and eased concerns the Fed may have been too slow to trim borrowing costs when it cut rates by half a percentage point on Wednesday.
The equity gains on Thursday and Friday mark a “delayed euphoric reaction,” to the Fed but one that may retreat, according to Nick Ferres, Chief Investment Officer of Singapore-based Vantage Point Asset Management. “Valuation is already heroic and risk compensation is poor, particularly if the earnings cycle disappoints.”
Over in Japan, a policy decision is due where the central bank is widely expected to hold its benchmark interest rate steady, leaving traders on watch for any clues regarding the prospects of a hike later this year. The nation’s key inflation gauge accelerated in August for a fourth consecutive month, according to the Ministry of Internal Affairs Friday.
The Fed has been a dominant factor for the Japanese currency and this was on display again with the yen whipsawing during US trading on Wednesday after the Fed cut rates and then cautioned that such a move shouldn’t be seen as a new pace of policy easing.
Despite the prospect of further Fed cuts and BOJ hikes in the coming months, the yen may fall further against the greenback, according to Mitul Kotecha, head of FX and emerging markets macro strategy Asia for Barclays.
“What we have seen is the dollar tends to weaken ahead of the Fed’s first rate cut and then stabilize and strengthen thereafter,” he said on Bloomberg Television.
Beyond Japan, data set for release in Asia includes loan prime rates for China, inflation for Hong Kong and foreign exchange reserves for India.
Gains for the S&P 500 on Thursday pushed the benchmark to its 39th record in 2024 and extending this year’s surge to about 20%. Tech led gains, while defensive industries underperformed. The Russell 2000 of small caps rose 2.1%. In late hours, FedEx Corp. tumbled on a bearish outlook. Nike Inc. surged after saying longtime executive Elliott Hill is coming out of retirement to replace John Donahoe as chief executive officer.
While a relative sense of calm prevailed, traders also braced for a quarterly episode known as “triple witching” in which derivatives contracts tied to stocks, index options and futures will mature — potentially amplifying market moves. About $5.1 trillion are set to expire Friday, according to an estimate from Asym 500. The options expiry coincides with the rebalancing of benchmark indexes.
Meantime, the latest MLIV Pulse survey showed that 57% of the 173 respondents believe a rotation into value stocks is likely to accelerate now that the Fed started the easing cycle.
The majority of survey participants, 75%, expect the US to manage a soft landing after the 50 basis-point rate cut, but even those favor value over AI stocks, according to the poll conducted immediately after the decision. Value was especially popular among those expecting the US to hit a recession.
In commodities, gold was steady after climbing 1.1% Thursday. Oil was on track for the biggest weekly advance since February after the US rate cut, while traders continued to monitor simmering tensions in the Middle East.
Key events this week:
- Japan CPI, rate decision, Friday
- China loan prime rates, Friday
- Eurozone consumer confidence, Friday
- Canada retail sales, Friday
Some of the main moves in markets:
Stocks
- S&P 500 futures fell 0.1% as of 9:04 a.m. Tokyo time
- Hang Seng futures rose 0.7%
- Japan’s Topix rose 1.4%
- Australia’s S&P/ASX 200 rose 0.2%
Currencies
- The Bloomberg Dollar Spot Index was little changed
- The euro was little changed at $1.1161
- The Japanese yen was little changed at 142.75 per dollar
- The offshore yuan was little changed at 7.0704 per dollar
Cryptocurrencies
- Bitcoin fell 0.2% to $62,938.52
- Ether was little changed at $2,466.77
Bonds
- The yield on 10-year Treasuries was little changed at 3.71%
- Japan’s 10-year yield advanced 2.5 basis points to 0.850%
- Australia’s 10-year yield was little changed at 3.92%
Commodities
- West Texas Intermediate crude was little changed
- Spot gold was little changed
This story was produced with the assistance of Bloomberg Automation.
--With assistance from Michael G. Wilson.
©2024 Bloomberg L.P.
