Asian Markets Surge Following US Rate Cut
Asian markets extended their rally on Friday, buoyed by the Federal Reserve's unexpected interest rate cut. The Bank of Japan, however, kept rates steady and maintained an optimistic outlook on the economy.
China's central bank surprised markets by holding its benchmark lending rates unchanged, defying expectations for a reduction. Chinese blue chips fell 0.3%, while the onshore yuan strengthened to its highest level in nearly 16 months, prompting intervention from state banks to curb its appreciation.
MSCI's broadest index of Asia-Pacific shares outside Japan rose 0.7%, tracking overnight gains on Wall Street. The index is on track for a weekly gain of 2.5%.
Japan's Nikkei jumped 2.1%, helped by a weaker yen. The index is up 3.5% for the week. Nikkei futures remained largely unmoved by the BOJ's decision.
The Bank of Japan kept its short-term rate steady at 0.25%, as expected, but upgraded its view on consumption. Investors will be closely watching Governor Kazuo Ueda's post-meeting press conference for any hints on the timing and pace of further hikes.
The dollar weakened against the yen, trading at 142.31 yen, after gaining about 1% this week. Data released on Friday showed Japan's core inflation accelerated for a fourth consecutive month, reinforcing the case for further policy tightening.
Overnight, Wall Street rallied following the Fed's rate cut. Investors are betting on continued U.S. economic growth, supported by better-than-expected jobless claims data. Markets are now pricing in a 40% chance of another 50 basis point cut in November and 73 basis points by year-end.
U.S. stock futures were slightly lower on Friday. The S&P 500 and Dow Jones Industrial Average surged to record closes on Thursday, while Nasdaq jumped 2.5%, led by tech shares.
In foreign exchange markets, the dollar remained near one-year lows against major currencies. The British pound held at $1.3278, having rallied 0.7% overnight to its highest level since March 2022, following the Bank of England's decision to hold rates steady.
Short-dated U.S. Treasuries held close to two-year highs. Two-year Treasury yields slipped 3 basis points on Friday but were flat for the week.
Commodities also held onto their weekly gains. Gold hovered near a record high at $2,592.17 an ounce, and oil prices are set for their second straight week of gain. Brent futures slipped 0.3% to $74.69 a barrel but are still up 4.2% this week.