Asian shares slip, yen steady ahead of Bank of Japan meeting

SINGAPORE  – Asian equities edged lower on Friday as investors grappled with mixed earnings reports, while the Japanese yen held firm ahead of the Bank of Japan’s policy review.

MSCI’s broadest index of Asia-Pacific shares outside Japan was down 0.32 percent, set to snap a three-day winning streak. The index is down nearly 3 percent for the month and 30 percent for the year.

Japan’s Nikkei fell 1.33 percent, while Australia’s S&P/ASX 200 index lost 0.55 percent. China’s stock market was 0.60 percent lower, with Hong Kong’s Hang Seng Index down 0.5 percent.

China stocks have had a rough week, with investors reeling from Monday’s brutal sell-off. Bleak industrial profit figure and widening COVID-19 outbreaks have also weighed on sentiment.

On Thursday, the European Central Bank raised interest rates again, but said “substantial” progress had already been made in its bid to fight off a surge in inflation.

The less hawkish comments from the ECB added to expectations that central banks are likely to slow their pace of rate hikes, especially after the Bank of Canada surprised the market by delivering a smaller-than-anticipated rate hike on Wednesday.

Rodrigo Catril, senior currency strategist at National Australia Bank, said the ECB delivered a 75 bps hike as expected, but it sounded less committal on future rate hikes.

Rates markets are cheering the idea of a potential slow down from central banks in terms of the pace of interest rate hikes, Catril added.

The focus now shifts to the monetary policy decision due on Friday from the Bank of Japan, the holdout “dove” among the world’s major central banks, along with and Governor Haruhiko Kuroda’s post-meeting briefing.

The central bank is set to keep ultra-low interest rates and remind markets it will remain a dovish outlier among a wave of central banks tightening monetary policy.

Core consumer inflation in Japan’s capital Tokyo, considered a leading indicator of nationwide figures, hit a 33-year high of 3.4 percent in October, data showed on Friday. Inflation in the Tokyo area thus exceeded the central bank’s 2 percent target for five straight months.

“We don’t think this morning’s much faster rate of inflation will change the BOJ’s policy decision today,” ING economists said in a note, adding Japan’s central bank takes a different view than the ECB.

“If inflation is not driven by demand-side factors, they will not change the easy policy stance and it seems like they believe this will maintain their credibility.”

The BOJ’s ultra-easy policy has helped trigger sharp yen declines that inflate the cost of importing already expensive fuel and raw material, prompting the government to intervene in the market to prop up the currency.

The yen last bought 146.47 per dollar, and was on track for a nearly 1% weekly gain, its largest since August.

The euro was up 0.18 percent at $0.998, following a more than 1 percent slide overnight, after the dovish tone from ECB.

The U.S. dollar index, which measures the greenback against a basket of currencies, fell 0.1 percent, after gaining nearly 0.8 percent overnight.

Meanwhile, Amazon.com predicted a slowdown in sales growth for the holiday season, while Intel cut its full-year profit and revenue forecast, stoking more fears of an economic slowdown.

The downbeat results from Amazon on Thursday added to a string of dismal reports from Big Tech companies, with over $200 billion in U.S. stock market value up in smoke in extended trade on the day. E-mini futures for the S&P 500 fell 0.33 percent.

Brent crude futures came off 42 cents, or 0.4 percent, to $96.54 a barrel at 0043 GMT. U.S. West Texas Intermediate (WTI) crude futures were down 56 cents, or 0.6 percent, at $88.52 a barrel.