Asian Markets Rise Ahead of Japan Rate Decision; US Futures Flat
Asian stock markets experienced gains on Thursday, driven by anticipation of a significant interest rate hike by the Bank of Japan. The Nikkei in Japan rose approximately 1.9%, South Korea's Kospi surged by about 2.6%, Hong Kong's Hang Seng climbed 0.6%, and Shanghai and Shenzhen saw increases of around 1% and 1.5%, respectively. The Bank of Japan is widely expected to raise its key interest rate by a quarter percentage point, from 1.00% to 1.25%, marking its highest level in 31 years. This move signals Japan's departure from an extended period of near-zero interest rates and expansive monetary policy, primarily in response to mounting inflationary pressures fueled by global energy and commodity price increases.
In addition to curbing inflation, the rate hike aims to bolster the Japanese yen, which has faced significant volatility and depreciation against major global currencies. Meanwhile, U.S. stock futures traded near flat, following a recovery on Wall Street the previous day. The S&P 500 gained 1.2% and the Nasdaq rose 1.7%, with technology stocks, particularly semiconductors, leading the advance. Intel and SK Hynix are reportedly in preliminary talks for joint memory chip production in the U.S., a move that could boost the sector. The Israeli company Tower Semiconductor also garnered attention for announcing serial production of optical engines for AI data centers.
U.S. Treasury yields declined, with the 10-year yield falling below 5% to 4.943%. This pullback occurred after yields had risen the day before due to the Federal Reserve's interest rate decision. Oil prices saw a decrease, with WTI crude down about 0.7% to $101 per barrel and Brent down 0.9% to $103 per barrel, as concerns over supply eased following reports of Saudi Arabia making additional crude oil available to Asian refineries.
In Israel, the stock exchange was closed on Thursday due to Yom Kippur and will reopen on Tuesday. The previous trading day, known as "Good Sign," saw the Tel Aviv 35 index rise by about 1%, and the Tel Aviv 90 by 0.2%. For the week, the Tel Aviv 35 gained approximately 1.6%, while the Tel Aviv 90 weakened by about 1%. The stock of the Tel Aviv Stock Exchange itself surged 15% on Wednesday, its best day since its 2019 IPO.
JPMorgan Chase CEO Jamie Dimon expressed continued skepticism about whether high inflation in the U.S. is fully behind us, despite the Federal Reserve's recent rate hike. He warned that persistent inflation, global government deficits, and substantial capital demands for areas like AI, rearmament, and infrastructure could continue to pressure interest rates upward. However, Dimon did not predict a U.S. recession, citing low unemployment, corporate profitability, and business formation as signs of economic strength.
