Asian stock markets and US futures posted modest gains on Friday, buoyed by the Bank of Japan's decision to maintain its key interest rate and a recovery in US equities after a turbulent period.
Bank of Japan Holds Steady Amid Inflation Outlook
The Bank of Japan concluded its policy meeting by keeping its key interest rate unchanged at 0.75%, a move widely anticipated by markets. The central bank had previously raised the policy rate to this level in December. In its assessment, the bank slightly upgraded its forecasts for future inflation and economic growth, signalling cautious optimism about Japan's economic trajectory.
Following the announcement, the Japanese yen weakened against the US dollar, trading at 158.64 yen compared to 158.42 yen previously. "With underlying inflation price pressures remaining firm, we expect the Bank of Japan to resume its tightening cycle in the coming months," noted Abhijit Surya of Capital Economics in a commentary.
Asian Markets Show Broad Gains
Across the Asia-Pacific region, equity markets generally moved higher. Tokyo's Nikkei 225 edged up 0.2% to 53,800.28. In China, the Hang Seng index in Hong Kong added 0.3% to 26,718.13, while the Shanghai Composite index also rose 0.3% to 4,133.58.
South Korea's Kospi climbed 0.6% to 4,983.36, after briefly surpassing the 5,000 mark for the first time on Thursday before retreating. Australia's S&P/ASX 200 gained 0.2% to 8,862.20. Taiwan's Taiex jumped 0.8%, and India's Sensex remained nearly unchanged.
US Markets Extend Rally Amid Political Developments
On Thursday, US stocks continued their upward momentum. The S&P 500 climbed 0.5% to 6,913.35, the Dow Jones Industrial Average rose 0.6% to 49,384.01, and the Nasdaq composite gained 0.9% to 23,436.02. This rally followed US President Donald Trump's announcement that he was calling off tariffs on European countries, which he claimed had opposed his calls for US control of Greenland.
Details regarding a potential deal on Greenland remained sparse, with Trump stating he had reached an agreement with the head of NATO, though nothing was signed yet. This pattern of making significant initial threats only to retract them after market reactions has been dubbed "TACO" by some observers, suggesting that "Trump Always Chickens Out" if financial markets respond strongly enough.
Tuesday's sharp decline in US stocks was the worst since October, prompting Trump to acknowledge "the dip," despite often taking credit when Wall Street performs well. In related news, JPMorgan Chase shares rose 0.5% after a lawsuit filed by Trump against the bank caused minor fluctuations; Trump accused the institution of closing his accounts for political reasons after he left office in 2021.
Economic Indicators and Market Sentiment
Treasury yields remained relatively stable, indicating that foreign investors were not hastily exiting the US bond market. Yields found support from several positive economic reports: fewer US workers applied for unemployment benefits than economists anticipated, suggesting a low pace of layoffs; the US economy grew at a faster rate during the summer than initially estimated; and November inflation was close to expectations, with consumer spending slightly better than forecast.
Global markets have stabilised following a easing in long-term Japanese government bonds, which had spiked earlier in the week due to concerns that Prime Minister Sanae Takaichi might implement policies adding to Japan's substantial debt. The 40-year Japanese government bond yield slipped back to 3.0955% after hitting a record above 4%.
Commodities and Currency Movements
In commodity markets, the price of gold rose 0.8%, staying near the $5,000 level, while silver gained 2.3%. Such precious metals often attract investors seeking safer assets during uncertain times. In energy markets, US benchmark crude oil added 52 cents to $59.88 per barrel, and Brent crude, the international standard, was up 54 cents at $64.60 per barrel.
On the currency front, the euro slipped slightly to $1.1750 from $1.1755, reflecting ongoing fluctuations in foreign exchange markets.
