Asian shares broadly higher; BOJ chatter lifts yen, dents Nikkei

Japanese national flag is hoisted atop the headquarters of Bank of Japan in Tokyo, Japan Sept 20, 2023. REUTERS/Issei Kato/File photo

SYDNEY  — Asian stocks were mostly up on Thursday as investors took comfort from growing signs the Federal Reserve will soon embark on rate cuts, while chatter of an imminent policy shift in Japan lifted the yen and pulled the Nikkei off its all-time highs.

Markets were also generally cautious ahead of the European Central Bank meeting later in the day. Both the EUROSTOXX 50 futures and FTSE futures were flat, while Nasdaq futures fell 0.4 percent and S&P futures slipped 0.2 percent .

MSCI’s broadest index of Asia-Pacific shares outside Japan rose 0.5 percent, helped by a 1.4-percent  jump in Taiwan’s share market to record highs.

Japan’s Nikkei slid 1.4 percent, after hitting a fresh all-time high earlier in the session, and the yen strengthened 0.5 percent to 148.61 per dollar, the highest in a month, as momentum builds that a move from the Bank of Japan to end negative interest rates could come as soon as this month.

Japanese workers’ nominal pay in January grew 2 percent from a year earlier, data showed, accelerating from a gain of 0.8 percent the previous month.

READ: Japan’s Dec real wages, household spending fall again

In other news, Japan’s major union won big pay hikes in 2024 wage talks. BOJ board member Junko Nakagawa signaled his conviction that conditions for phasing out the massive stimulus were falling into place.

End of Japan’s negative interest rate policy

“The market finally appears to be waking up to the idea that in two weeks, we may see the end of the Bank of Japan’s negative interest rate policy,” said Tony Sycamore, market analyst at IG.

There was little cheer in markets to the better than expected China trade figures, after an official from the state planner flagged the upside surprise a day earlier.

READ: China’s Jan-Feb imports and exports beat forecasts

Chinese bluechips fell 0.4 percent, weighed by a 3.3-percent plunge in the healthcare sector on the news that a U.S. bill targeting Chinese biotech companies like BGI and WuXi AppTec was moving ahead.

WuXi’s mainland shares fell 10% to suspend trading while its Hong Kong shares tumbled 18 percent . Hong Kong’s Hang Seng index fell 0.5 percent .

Overnight, Wall Street closed higher after Federal Reserve Chair Jerome Powell stuck to the script by saying the Fed still expects to cut rates later this year, even though continued progress on inflation “is not assured”.

That kept bets of a rate cut in June alive at an 84 percent probability. Longer-term bond yields slipped, dollar fell, gold prices hit a record high and oil jumped.

“There was nothing particularly surprising within Fed Chair Powell’s prepared monetary policy testimony to Congress  – which is pretty short in fairness – or the Q&A session,” said James Knightley, chief international economist at ING.

“More data is required, but with more evidence of a cooling jobs market we still think they can cut rates from June.”

No surprises from Powell

Indeed, data showed U.S. private payrolls increased slightly less than expected in February, although the report does not have a strong correlation with the official non-farm payrolls report due on Friday.

READ: Fed’s Powell still sees rate cuts, but inflation progress ‘not assured’

For now, investors are looking ahead to the policy action in Europe. The European Central Bank is set to keep interest rates steady at a record 4 percent, but any messaging from policymakers that support a rate cut in June would be a relief to markets.

Futures are almost fully priced in for a first rate cut from the ECB in June, with a total easing of 88 basis points expected for all of this year.

In the currency markets, the broad weakness in the U.S. dollar has helped the euro break key resistance to a six week top of $1.0899, but a major chart level of $1.0916 weighed.

Treasuries were a little lower in Asia. The benchmark 10-year U.S. yield rose almost 2 basis points to 4.1195%, having slipped 3 basis points overnight to 4.079 percent , the lowest in a month.

Commodity prices rallied on a softer dollar. Gold prices rose 0.4 percent on Thursday to $2,156.49, another record high.

Oil prices were mostly flat, having jumped 1% on Thursday. Brent held at $82.97 a barrel, while U.S. crude was little changed at $79.11 per barrel.

Bitcoin hovered near record highs at $66,361.