On Friday, Japanese shares soared to 34-year highs, contributing to the global market’s anticipation of a third consecutive week of gains. Meanwhile, in China, mainland markets remained closed, and Hong Kong’s trading activity was thin, closing early with the Hang Seng down by 0.8%. The subdued activity reflects concerns that Chinese authorities might not fulfill promises of support amid a downturn in sentiment.
China’s Hang Seng index suffered a 29% decline in the zodiac year of the rabbit, leading into the dragon year with apprehension and expectations for some form of support announcement during the Lunar New Year holiday.
Chi Lo, senior markets strategist for Asia Pacific at BNP Paribas Asset Management, expressed cautious optimism, stating, “I am betting that decisive action is happening. But it is a leap of faith so to speak.” Lo highlighted the need for concrete measures from Beijing, given past promises that lacked follow-up.
MSCI’s broadest index of Asia-Pacific shares outside Japan fell by 0.3%, albeit still managing a weekly rise. In Japan, the Nikkei rose by 0.3%, supported by a weakening yen, trading at its lowest level in over two months at 149.49 per dollar.
Notable movements in the Japanese market included SoftBank (TYO:9984), which surged by 10% following a swing to profit and an optimistic revenue forecast from its Arm chip design unit. Conversely, Nissan (OTC:NSANY) shares plummeted by almost 12% due to a downward revision in outlook attributed to slumping China sales.
In Australia, building-materials maker Boral (OTC:BOALY) witnessed an over 8% surge to a record high, driven by margin improvement.
Commodities saw Brent crude futures at $81.46 a barrel, poised for a weekly gain of over 5%, buoyed by geopolitical tensions including Israel’s rejection of a ceasefire offer and a U.S. strike on an Iran-backed militia commander in Iraq.
Bond markets observed pressure following a strong jobs report and central bank comments hinting at reticence on rate cuts. In Australia, the central bank warned of inflation concerns, leading markets to push out rate cut pricing and contributing to the Australian dollar’s sixth consecutive weekly loss.
New Zealand also saw a narrowing likelihood of further rate hikes, with the Reserve Bank of New Zealand’s upcoming policy meeting on Feb. 28 closely monitored. The New Zealand dollar rose by 0.5% to $0.6129 and was set for a 1% weekly gain.
In the U.S., inflation revisions awaited close scrutiny, potentially challenging assumptions of inflation retreat. Analysts emphasized the importance of these revisions, recalling significant changes observed last year that strengthened the U.S.’s inflation momentum beyond initial estimations.