ASIAN markets rose on Friday as a below-forecast read on US inflation boosted hopes for another interest rate cut next month, while blockbuster earnings from chip firm Micron helped soothe nerves over a tech bubble.
Investors were also keeping tabs on the Bank of Japan as it concludes a policy meeting amid expectations it will hike its own borrowing costs in the face of a weakening yen and rising prices.
A tough week for global equities looked to be heading for a positive end after figures showed US inflation slowed last month to its lowest level since July and was well below forecasts.
The reading provided a sliver of light for rate cuts, after traders pared their bets on a fourth successive reduction in January following the Federal Reserve’s policy decision last week.
Markets see a 20 per cent chance of a cut next month, though they see two by the end of 2026, according to Bloomberg News.
However, analysts said disruptions to data collection during the longest-ever US government shutdown, which ended in mid-November, had likely distorted the figures.
Economists at Bank of America warned that “we recommend taking (the) report with a large grain of salt”, citing “shutdown-related distortions”.
Still, the news helped lift all three main indexes on Wall Street, which has come under pressure in recent weeks amid questions about when, if ever, investors will see returns on the colossal amounts of cash that have been pumped into artificial intelligence (AI).
That has led to speculation about a bubble in the tech sector – which has led the equity surge to record highs this year – that could pop soon.
Those concerns, though, were tempered on Thursday after blowout earnings from chip company Micron Technology, which said quarterly profits nearly tripled to US$5.2 billion as it benefits from the AI boom. It also gave an upbeat outlook for the current three months.
The positive lead from Wall Street was picked up by Asia, where Hong Kong, Shanghai, Sydney, Seoul, Singapore, Taipei and Wellington were all up.
Tokyo gained more than one per cent as attention turns to the Bank of Japan (BoJ) which is expected to lift rates to a 30-year high later in the day.
The decision comes hours after a report showing inflation held steady at three per cent in November.
Yields on Japanese government bonds have risen in recent weeks on worries about Prime Minister Sanae Takaichi’s budget discipline, while the yen has weakened. Takaichi, who formally took power in October, has promised to fight inflation as a major priority.
The yen was barely moved against the dollar on Friday, though observers see it strengthening as the Fed cuts rates at the same time the BoJ lifts them.
“As the BoJ proceeds with measured rate increases while Fed implements one to two cuts, the yield gap that has long supported dollar strength will continue tightening,” wrote IG market analyst Fabien Yip.
“This convergence should exert sustained downward pressure on (the dollar against the yen) throughout the year.” AFP
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