Asian shares rose on Friday as technology firms enjoyed a much-needed respite from heavy selling in recent weeks, with a big shortfall in US job creation easing concerns over a Federal Reserve interest rate hike.
Regional markets have been waiting for traders for some time as the prospect of higher borrowing costs – fueled by a fresh rise in inflation – and concerns about stretched valuations have fueled questions about how far the AI capital boom should go.
That sent chip firms like South Korea’s SK hynix and Japan’s Kioxia falling from record highs, along with benchmark indexes in Seoul and Tokyo.
But the sell-off stalled on Friday as investors welcomed data showing the US economy added less than half as many jobs as forecast in June, while figures for the previous two months were also revised down.
The readings suggested the labor market was not as strong as previously thought and gives the Fed little room to hold off on an expected rate hike for now.
Speculation has grown since the central bank’s policy meeting in June that it will announce a hike this year after new chief Kevin Warsh said price stability was his main goal, citing persistently elevated inflation.
In early trade, the Seoul Kospi rose more than two percent — down about 20 percent from its June 19 record high — driven by rallies in SK hynix and Samsung.
Tokyo was also on the rise, along with Hong Kong, Shanghai, Sydney, Singapore, Wellington and Manila.
However, the likelihood of an increase before the end of the year remains.
“Not long ago the Fed had an easing bias which was driven largely by concerns over the labor market,” wrote Rodrigo Catril at National Australia Bank.
“The recent improvement in payrolls along with higher inflation shifted the Fed’s bias toward neutral with the new Fed Chair stressing the need for the Fed to ‘recommit to providing price stability.’
“The US labor market today is not strong enough to drive rate hikes, but more importantly it is no longer a handbrake or obstacle to hikes, leaving the Fed to focus solely on the other side of its mandate.
“In other words, the decline in inflation after five years of overshooting and six months of the most recent core rebound.”
The gains in Asia followed a mixed day on Wall Street, where the Nasdaq sank 0.8 percent but the Dow jumped more than one percent in the final day before a long Independence Day weekend.
Analysts said the pullback in tech games wasn’t surprising given the impressive gains they’ve made over the past two years, as traders shifted from the sector to other industries where bargains could be found.
The dollar pared losses seen in the wake of the jobs data as investors lowered their rate expectations, while the non-yielding gold – which benefits from lower interest rates – climbed to $4,200 for the first time in two weeks.
Oil prices rose but pared recent losses boosted by increased traffic through the Strait of Hormuz and hopes for progress in US-Iran talks.
– Key figures around 0230 GMT –
Tokyo – Nikkei 225: UP 0.7 percent to 69,243.68 (breakdown)
Seoul – Kospi: UP 2.8 percent to 7,864.09
Hong Kong – Hang Seng Index: UP 1.8 percent to 23,464.43
Shanghai – Composite: UP 0.3 percent to 4,041.74
Dollar/yen: UP at 161.15 yen from 161.12 yen on Thursday
Euro/dollar: UP at $1.1438 from $1.1429
Pound/dollar: UP at $1.3357 from $1.3345
Euro/pound: DOWN at 85.64 pence from 85.65 pence
West Texas Intermediate: UP 0.3 percent to $68.91 a barrel
Brent North Sea crude: up 0.4 percent to $72.07 a barrel
New York – Dow: UP 1.1 percent to 52,900.07 (close)
London – FTSE 100: UP 1.7 percent to 10,652.87 (close)
