Asian markets rise as US inflation eases, Micron soothes tech fears ~ EconomyLens.com

Hong Kong (AFP) – Asian markets rose Friday as a below-forecast read on US inflation boosted hopes for another interest rate cut next month, while blockbuster earnings from chip firm Micron helped soothe nerves over a tech bubble. The yen fell against the dollar after the Bank of Japan (BoJ) hiked its own borrowing costs to a three-decade high, hours after data showed prices continued to rise more than preferred.

A tough week for global equities looked to be heading for a positive end after figures showed US inflation slowed last month to its lowest level since July and was well below forecasts. The reading provided a sliver of light for rate cuts, after traders pared their bets on a fourth successive reduction in January following the Federal Reserve’s policy decision last week. Markets see a 20 percent chance of a cut next month, though they see two by the end of 2026, according to Bloomberg News.

However, analysts said disruptions to data collection during the longest-ever US government shutdown, which ended in mid-November, had likely distorted the figures. Economists at Bank of America warned that “we recommend taking (the) report with a large grain of salt,” citing “shutdown-related distortions.” Still, the news helped lift all three main indexes on Wall Street, which has come under pressure in recent weeks amid questions about when, if ever, investors will see returns on the colossal amounts of cash that have been pumped into artificial intelligence (AI).

That has led to speculation about a bubble in the tech sector — which has led the equity surge to record highs this year — that could pop soon. Those concerns, though, were tempered Thursday after blowout earnings from chip company Micron Technology, which said quarterly profits nearly tripled to $5.2 billion as it benefits from the AI boom. It also gave an upbeat outlook for the current three months.

The positive lead from Wall Street was picked up by Asia, where Tokyo added one percent while Hong Kong, Shanghai, Sydney, Seoul, Singapore, Taipei, Mumbai, Bangkok, and Wellington were all up. London and Paris fell at the open, while Frankfurt was flat.

The BoJ lifted borrowing costs to their highest level since 1995, hours after news that inflation held steady at three percent in November, well above its target of two percent. The yen retreated to as much as 156.71 per dollar — from 155.86 late Thursday — before recovering to around 155.90. Yields on 10-year Japanese government bonds hit a 26-year high. They have been on the rise in recent weeks on worries about Prime Minister Sanae Takaichi’s budget discipline, while the yen has weakened.

Takaichi, who took power in October, has promised to fight inflation as a major priority. While the Japanese currency remains under pressure, observers see it strengthening as the Fed cuts rates at the same time the BoJ lifts them. “As the BoJ proceeds with measured rate increases while Fed implements one to two cuts, the yield gap that has long supported dollar strength will continue tightening,” wrote IG market analyst Fabien Yip. “This convergence should exert sustained downward pressure on (the dollar against the yen) throughout the year.”