Asian Markets End Week on a High Note
Asian shares closed the week on a positive note, with Japanese stocks nearly recouping all of their losses from Monday's market crash. The Nikkei index rose 1.7% on Friday, erasing most of its 13% plunge earlier in the week and ending the week down just 1.5%.
The broader MSCI index of Asia-Pacific shares outside Japan also climbed 1.4%, reversing Thursday's decline and ending the week down only 0.3%.
The rebound in Asian markets followed a strong performance on Wall Street overnight, where the Nasdaq gained 3% and the S&P 500 rose 2.3%. The positive sentiment was fueled by data showing that U.S. jobless claims fell more than expected last week, suggesting that fears of a weakening labor market were overblown.
This data led markets to reduce the chance of a half-point rate cut from the Federal Reserve in September to 54% from 69% a day earlier. Stocks had sold off sharply after last week's U.S. jobs report sparked fears of a potential recession, but investors have since bought into the recent dip.
Further supporting sentiment was Chinese data showing that consumer inflation ran at 0.5% in July, above forecasts of 0.3%. This suggests a lower risk of the Chinese economy sliding into deflation.
"The prospect of better-than-feared U.S. growth and a weaker yen constrain the fundamental and technical risks that inspired the extreme volatility experienced at the start of the week," said Kyle Rodda, a senior financial market analyst at Capital.com.
However, Rodda cautioned that it is too early to say whether the markets have truly turned the corner. He believes that the August Non-Farm Payrolls report will be crucial in determining whether the recent volatility was just a growth scare or a sign of deeper problems.
Meanwhile, the U.S. dollar gained for a fourth straight day against the Japanese yen, reaching 147.35 yen. This represents a 0.6% advance for the week, despite Monday's sharp 1.5% plunge. The yen had initially gained earlier in the week following a surprise rate hike by the Bank of Japan, but this has since stabilized.
Bond yields have also climbed this week, with safe havens in less demand. U.S. 10-year yields held at 3.9781%, well off Monday's low of 3.667%, and were set for a weekly gain of 18 basis points.
In commodities, crude oil prices slipped on Friday but are still set for decent weekly gains on supply fears amid the ongoing conflict in the Middle East. Brent crude futures fell 0.2% to $78.97 a barrel, but were up more than 3% for the week. U.S. West Texas Intermediate crude also slipped 0.2% to $76.03, also up over 3% for the week.
Gold prices also eased, down 0.1% at $2,424.26 an ounce.