Traders focus on retail sales at the New York Stock Exchange. Almost all major stock benchmarks gained in Asia, with a regional gauge set for its best weekly performance in a year. Gains for Japanese equities came at the expense of a weaker yen, which boosts earnings for exporters. The currency fell 1.3% against the dollar on Thursday, and was trading around the 149 level, easing fears of a massive carry trade unwind.
A slew of US data, from inflation to jobless claims to retail sales, this week has reassured investors while reinforcing the claims of those arguing that the world’s biggest economy is set for a “Goldilocks” scenario where inflation is contained without endangering growth. Global stocks have largely erased the losses seen last week when traders were worried the Federal Reserve won’t cut rates fast enough to stop a recession.
“Asian equities are enjoying an impressive run today, driven by a renewed sense of ‘perfect balance’ thanks to recent well-anticipated economic releases,” said Hebe Chen, an analyst at IG Markets. “Japanese stocks, in particular, continue their robust recovery with no signs of slowing down yet.”
Treasuries in Asia were steady after a Thursday slump that tracked expectations for less aggressive Fed easing. Swaps market pricing now anticipates three 25 basis point cuts across the Fed’s remaining 2024 meetings, down from the four expected earlier in the week.
Gains for Japanese equities came amid fresh weakness for the yen. The Japanese currency rose slightly to trade around 149 per dollar, after falling 1.3% against the greenback a day earlier to the weakest level since early August. The weakness may even lure some hedge funds back to the carry trade that blew up two weeks ago.
The softer currency boosted Japanese equities, which rebounded further from last week’s tumult, helped by encouraging Japanese economic growth data released Thursday. The Nikkei 225 index was on pace for its best week since April 2020.
Elsewhere in Asia, China’s central bank chief pledged further steps to support the country’s economic recovery, while cautioning that it won’t adopt “drastic” measures.
Meanwhile, Australian sovereign bond yields climbed Friday, partly tracking the move in Treasuries and as the nation’s central bank governor said the Reserve Bank of Australia remains some way off easing monetary policy.
Alibaba Group Holding Ltd. rose as optimism over tech stocks outweighed concerns about its earnings. JD.com Inc. gained the most since March after beating net profit estimates in results released late Thursday.
US rally
The S&P 500 extended a six-day rally to 6.6% on Thursday — the best performance in such a span since November 2022. The Russell 2000 index of smaller firms outperformed on the day, climbing 2.5%. Wall Street’s “fear gauge” — the VIX — dropped to around 15. The rebound for US stocks from the heavy selling last week indicates trend-following quant funds may return, adding further support to stocks.
Walmart — a barometer of consumer spending — jumped on a solid outlook. Applied Materials, the largest US maker of chip-manufacturing equipment, gave a sales forecast in late US hours that met estimates.
US officials have been trying to use higher rates to ease inflation without causing the economy to contract — a scenario known as a “soft landing.” Fed Bank of St. Louis President Alberto Musalem said the time is approaching when it will be appropriate to cut rates. His Atlanta counterpart Raphael Bostic told the Financial Times he’s “open” to a reduction in September.
“A soft landing is no longer a hope. It’s becoming a reality,” said David Russell at TradeStation. “These numbers also suggest that recent market volatility wasn’t really a growth scare. It was just normal summer seasonality amplified by moves in the currency market.”
In commodities, gold was on track for a small weekly gain. while oil edged lower as the market weighed strong US economic data and a possible attack by Iran or its proxies on Israel against a lackluster Chinese demand outlook.