Market Update: Asian Stocks Poised for Best Week Since February
Asian equities followed Wall Street higher on Friday after the latest reading on U.S. inflation soothed investors’ concerns over rising inflation. Meanwhile, the Japanese yen recovered from three-month lows against the dollar after falling sharply earlier in the week.
Asian Market Recap
With the exception of mainland China, all of Asia’s major indexes recorded firm gains. In Japan, the Nikkei surged 1.1%, bringing its one-month return to almost 5%. The Topix Index in Tokyo also advanced 0.8%.
The Hang Seng Index in Hong Kong rose 1.4%. Minor declines were reported in the mainland’s CSI 300 Index and Shanghai Composite Index.
In South Korea, the Kospi jumped 0.7% with technology and automobile sectors leading the way higher.
Meanwhile, the broader MSCI Asia Pacific Index is on track for its best weekly advance in about three months. At press time, it had gained 1% and was trading above its 200-day simple moving average.
Asian stocks are following in Wall Street’s lead after the Dow Jones Industrial Average notched its sixth consecutive daily advance. The blue-chip index closed at more than three-week highs as implied volatility fell to its lowest level since December.
U.S. Dollar Hovers Near Five-Month High
The U.S. dollar continued to back off from yearly highs on Friday as bullish optimism was contained over signs that inflation isn’t rising as quickly as expected. The dollar index (DXY), which tracks the greenback’s performance against a basket of six currencies, hovered near 92.71.
DXY has rallied 3.5% over the past month and is now in positive territory for the year as rising bond yields and a more hawkish Federal Reserve fueled investor sentiment. Though U.S. inflation came in slightly weaker than expected on Thursday, the Fed is on track to continue normalizing monetary policy in the latter half of the year.
FOMC officials are widely expected to raise rates at their next meeting in June. In fact, traders are pricing a 100% probability of liftoff next month, according to the CME Group’s FedWatch tool.
Geopolitical developments in Asia and the Middle East remained a focus in commodity markets, with crude oil setting fresh three-and-a-half year highs on New York and London exchanges.
The latest rally was triggered by President Trump’s withdrawal from the Iran nuclear deal, a move that re-imposes sanctions against the Islamic Republic.
Investors had more reason to be optimistic on North Korea after Trump confirmed he would meet with leader Kim Jong-n at a planned summit in Singapore next month.
“We will both try to make it a very special moment for World Peace!” the U.S. president tweeted Thursday.
Last month, the leaders of North and South Korea pledged to pursue a comprehensive peace that entails full-scale denuclearization of the peninsula. Kim even pledged to close down North Korea’s nuclear test site as early as this month.
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