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

(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 gained as the Bank of Japan left interest rates unchanged.

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The MSCI Asia Pacific Index rose as equities in Japan, South Korea and Australia advanced, while mainland Chinese shares slipped. A gauge of global stocks set a fresh peak alongside US shares Thursday.

The BOJ kept its monetary policy settings steady Friday, signaling it sees no need to hurry with interest rate hikes as it monitors financial markets after its July increase and hawkish views spooked investors. Data released earlier showed the nation’s key inflation gauge accelerated in August for a fourth consecutive month.

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

Treasury yields were little changed on Friday, while an index of dollar strength was locked in a narrow range.

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 China, the country is considering removing some of the largest remaining curbs on home purchases after previous measures failed to revive a moribund housing market, according to people familiar with the matter. That pushed the BI China Real Estate Owners and Developers Valuation Peer Group gauge higher.

Meanwhile, the nation’s banks maintained their benchmark lending rates for September, as policymakers held off on further monetary stimulus while financial institutions struggle with record-low profit margins. The Securities Times reported on Friday that this week’s Fed rate cut has provided room for China to boost monetary and fiscal stimulus to support the economy.

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The European Union and China agreed to intensify discussions to avert looming tariffs on electric cars ahead of a deadline that’s only days away.

Elsewhere, Wall Street banks are divided on the pace and extent of upcoming Federal Reserve rate cuts. JPMorgan Chase & Co. expect another 50 basis point reduction in November, while Goldman Sachs Group Inc. anticipates 25 basis point cuts at each meeting from November to June next year.

In Asia, Taiwan’s property and construction stocks dropped Friday following the central bank’s decision to increase the amount of funds banks must hold in reserve to cool the sizzling property market.

Data set for release include inflation for Hong Kong and foreign exchange reserves for India.

In commodities, gold steadied near a record high while oil was on track for the biggest weekly advance since April after the US rate cut.

Key events this week:

• Japan rate decision, 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 12:52 p.m. Tokyo time

• Nikkei 225 futures (OSE) rose 2%

• Japan’s Topix rose 1.4%

• Australia’s S&P/ASX 200 rose 0.4%

• Hong Kong’s Hang Seng rose 1.3%

• The Shanghai Composite fell 0.2%

• Euro Stoxx 50 futures fell 0.2%

• Nasdaq 100 futures fell 0.2%

Currencies

• The Bloomberg Dollar Spot Index was little changed

• The euro was little changed at $1.1165

• The Japanese yen rose 0.3% to 142.16 per dollar

• The offshore yuan rose 0.3% to 7.0453 per 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 10-year Treasuries was little changed at 3.71%

• Japan’s 10-year yield was unchanged at 0.850%

• Australia’s 10-year yield was little changed at 3.92%

Commodities

• West Texas Intermediate crude was little changed

• Spot gold rose 0.2% to $2,592.04 an ounce

This story was produced with the assistance of Bloomberg Automation.

–With assistance from Winnie Hsu.

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