Asian Shares Gain Led by China, Yen Rises on CPI: Markets Wrap

The yen strengthened Friday as Tokyo inflation data exceeded estimates. Asian stocks rose.

Shares in China gained amid speculation that Beijing will provide more support for the economy at a key policy meeting in December. The nation also extended tariff exemptions on select American items, implying it may be less willing to take a hard line amid US trade tensions. US markets were closed Thursday for the Thanksgiving holiday. 

Shares in Australia and Japan fell, while South Korea’s declined most in the region as a surprise interest-rate cut by the central bank shifted investor focus to slowing economic growth. MSCI’s regional equity gauge rose 0.5% Friday, though was on track for a second straight monthly loss.

The yen rose to the highest level in more than a month against the greenback, strengthening past 150. The dollar slipped against major currencies, with an index of greenback strength headed for its first weekly decline in two months. Treasury yields fell as cash trading in Asia resumed.

The moves underscored the muted appetite for risk across global markets during a week that is typically marked by lower volumes due to the US holiday. Month-end positioning may also prompt some investors to rebalance portfolios after a record high for American stocks this week. US equity futures climbed. 

Gains for Japan’s currency were helped by Tokyo inflation data that showed prices rose more than expected on a headline basis, but broadly in line with estimates once fresh food and energy were excluded. Swaps market pricing indicates a more than 60% chance the Bank of Japan will raise interest rates when it meets next month.

“Strong Tokyo CPI reading looks to have again supported further strengthening,” said Alan Lau, FX strategist at Malayan Banking Bhd. “With a BOJ December 25 basis point hike looking increasingly likely, we see that USD/JPY would sustainably break below the key 150.00 support and move lower to test the 142.00 level where it had failed to decisively go below in September”

Japan may also delay a decision on raising taxes to help cover rising defense spending, a senior ruling coalition official said.

China’s health-care stocks gained after the latest national reimbursement drug list results from the body overseeing national medical insurance. Among the new entrants, a record 38 are innovative medicines. The nation’s food, beverage and dining stocks also advanced after officials held a meeting to boost consumption. 

Indonesia’s benchmark stock index fell about 10% from its year’s high, heading for a technical correction brought on by slowing economic growth and regional uncertainties after Donald Trump’s win in the US election. 

Australian 10-year bond yields were flat after Reserve Bank Governor Michele Bullock said core inflation remains too high and pushed back on expectations of near-term rate cuts. The Australian dollar strengthened against the greenback Friday.

Elsewhere in currency markets, Brazil’s real tumbled to a record low on disappointment over a government plan to cut spending, while Mexico’s peso rallied amid thin trading due to the US holiday. 

Some investors are also recalibrating their expectations for US inflation and future Federal Reserve interest rate cuts following data released earlier in the week.

In PCE data released earlier this week, “core services came out quite strong,” said Kevin Thozet, a member of the investment committee at Carmignac. “We are not heading for double-digit inflation but the disinflationary trend is stalling. The result of the US elections could prolong this cycle with tax cuts.”

On the corporate front, shares of Hong Kong property developer New World Development Co. dropped after Bloomberg reported that Chief Executive Officer Eric Ma is expected to step down, citing people familiar with the matter.

In commodities, oil gained, with the market now looking ahead to an upcoming OPEC meeting that has been delayed until Dec. 5. Gold rose for a fourth session, though is still on pace to drop for the first month in the past five.

Some of the main moves in markets:

This story was produced with the assistance of Bloomberg Automation.

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