Japanese shares rise as dollar weakens in thin Asian trading

The dollar weakened against its Group-of-10 counterparts and Japanese stocks climbed amid subdued trading on Monday, with many major centres in Asia closed for lunar new year celebrations.

The Topix index jumped about 0.9% while Australian shares reversed a small initial gain. US equity futures edged lower after a rally on Friday, when the S&P 500 Index rose for the first time in four days and the tech-heavy Nasdaq 100 saw the biggest one-day gain since November as Google parent Alphabet and Netflix surged. Contracts for European stocks climbed.

Treasuries were little changed in Asia while bond yields moved higher in Australia and New Zealand, tracking moves in the US debt market on Friday. Japan’s benchmark 10-year yield was unchanged at 0.4%, 10 basis points below the ceiling set by policymakers in Tokyo.  

“The Bank of Japan will continue to be that central bank that stands on its own and tries to almost sing its own tune,” Katrina Ell, an economist at Moody’s Analytics, said on Bloomberg Television. “Domestic demand in Japan still is incredibly soft, so they are trying to resist that tightening urge that we’ve seen from other developed and even developing economies.”

The yen rose about 0.1% amid the broad weakness in the greenback. Traders in global markets across multiple asset classes have been taking cues from US central bankers. Federal Reserve governor Christopher Waller said on Friday that policy looked close to sufficiently restrictive and he backed moderation in the size of rate increases. Philadelphia Fed president Patrick Harker repeated his view for more incremental steps in rate hikes and Kansas City Fed chief Esther George said the economy can avoid a sharp downturn.

Yet as optimism rises, US financial conditions have become less restrictive, raising another potential challenge to efforts to tame inflation that may give policymakers reason to rethink their views.

IG Markets analyst Hebe Chen said traders are “trying to downplay the fundamental shortcomings” in the outlook. She doesn’t expect the Fed to cut rates this year, she said on Bloomberg Television. Chen also cautioned that while China’s reopening is positive, this won’t fix all the problems its economy faces, including troubles in the property sector.

New Zealand’s shares benchmark fell and the nation’s currency rose after the Labour Party endorsed a replacement for Jacinda Ardern as prime minister. The new leader, Chris Hipkins, is expected to prioritise the economy as a recession looms after a series of sharp interest rate hikes.

Elsewhere, oil fell slightly after rallying to the highest since mid-November on Friday, when it capped its second consecutive week of gains on optimism over increased demand from China. Gold edged higher.

Financial markets trading in Asian hours is likely to be thinner than usual with major centres including Hong Kong, Shanghai, Singapore and Seoul closed for lunar new year celebrations on Monday. Many regional markets will remain closed until midweek and mainland China trading won’t resume until January 30.

Bloomberg
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