As attention shifted to the Federal Reserve's first possible interest rate decrease in little than four years, most Asian equities increased on Friday. Hong Kong markets led gains due to bargain buying into regional technology giants.
After experiencing extreme fluctuations this week due to dovish remarks from the Bank of Japan and muted inflation indications, Japanese equities underperformed their regional counterparts. Also on the agenda is a BOJ meeting for next week.
Regional markets followed some of Wall Street's overnight gains as traders ignored stubborn inflation figures in the midst of ongoing speculation that the Fed will drop interest rates when it meets the following week. Consistent purchasing in the IT industry was also beneficial.
The best-performing index in Asia on Friday was the Hang Seng of Hong Kong, which continued to rise into the third session as investors bought deeply discounted local internet firms.
However, the outlook for Chinese markets was somewhat less optimistic. This week, the Shanghai Composite and Shenzhen CSI 300 indices saw a little increase from their more than seven-month lows.
After a series of mediocre economic data for August from China, sentiment towards the country remained tense. Additional trade restrictions from the US also weighed.
The Nikkei 225 and TOPIX indices in Japan declined on Friday, behind their regional counterparts.
After experiencing extreme fluctuations, both indices were poised for a quiet conclusion to the week as investors assessed cautious indications about inflation and cautious remarks made by BOJ officials.
BOJ officials issued a warning, stating that increased interest rates will probably be followed by a rise in inflation. However, this signal was partially weakened by sluggish producer price index inflation.
The BOJ is scheduled to convene the following week, but investors are apprehensive about the bank raising interest rates once again. Next week, there will also be statistics on consumer inflation in Japan.
Other Asian markets were mixed amidst uncertainty over the Fed’s rate cut decision next week. Even though stronger-than-expected inflation data supports the case for 25bps, signs of weakness in the labour market maintain the view for a possible 50bps.
According to CME Fedwatch, traders were pricing in a 56% likelihood of a 25 bps drop and a 44% chance of a 50 bps cut.
(Sources: investing.com, reuters.com)
