SYDNEY: Asian stocks climbed into the black on Thursday after an upbeat reading on US consumers cheered Wall Street investors, while the yen added to its recent massive gains as Japanese bond yields shifted into a new higher range.
In a surprise, US consumer confidence rose to an eight-month high in December as the labour market remained strong.
Inflation expectations fell to 6.7%, the lowest since September 2021, courtesy of falling gas prices.
That helped spark a rally on Wall Street with S&P 500 futures and Nasdaq futures both adding another 0.3% on Thursday. EUROSTOXX 50 futures rose 0.1% and FTSE futures 0.3%, though turnover was subdued by the usual seasonal lull.
MSCI’s broadest index of Asia-Pacific shares outside Japan firmed 1.1%, while Chinese blue chips rose 0.75%.
Japan’s Nikkei edged up 0.2% after the country’s government revised up its growth forecast for the next fiscal year on hopes for higher business expenditure and substantial wage hikes.
Investors continue to grapple with the ramifications of the Bank of Japan’s (BOJ) shock decision to allow JGB yields to rise this week, leading many to assume an outright tightening of policy is only a matter of time.
Ten-year government bond yields have soared 23 basis points so far this week to 0.480%, the highest since July 2015 and within a whisker of the BOJ’s new ceiling of 0.5%.
“The jump in yields and the further strengthening of the yen will lower the value of assets owned by Japanese investors,” noted analysts at Capital Economics.
“Insurance firms will be most affected by falling bond prices, whereas pension funds have most to lose from a stronger exchange rate. However, we doubt that lower investment returns carry systemic risks.”
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Capital also now expects the dollar to drop toward 125 yen next year. The dollar was already down at 131.93 yen, having shed 3.5% for the week so far, though it had found some support around 130.40.
The euro had also lost 3.6% on the yen for the week at 140.11.
With all the action in the yen, the euro was a shade firmer on the dollar at $1.0622.
Sterling had less luck after British public borrowing hit a record in November and strikes across the country darkened the UK economic outlook.
The pound was pinned at $1.2082 having hit a three-week low overnight.
The pullback in the dollar has been a boon for gold, which was up 1.4% on the week so far at $1,818 an ounce.
Oil prices rallied after data showed a larger-than-expected draw in US crude stockpiles, though a massive snowstorm is expected to blanket much of the United States and hit travel-related demand for fuel.
Brent gained 34 cents to $82.54 a barrel, while US crude rose 44 cents to $78.73 per barrel.
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