By Ese Erheriene
Japan’s Nikkei entered bull market territory on Friday, with a weaker yen helping drive gains across key Asian markets as robust U.S. economic data buoyed expectations of an interest-rate increase next month.
The Nikkei Stock Average /zigman2/quotes/210597971/delayed JP:NIK -0.39% closed up 0.6% at 17,967.41 points, up 20% from its recent low in June and having hit a ten-month high earlier in the session.
Elsewhere, Australia’s S&P/ASX 200 /zigman2/quotes/210598100/delayed AU:XJO -0.33% ended 0.4% higher, the Hang Seng Index /zigman2/quotes/210598030/delayed HK:HSI -1.07% in Hong Kong was last up 0.4%, and Singapore’s FTSE Straits Times Index /zigman2/quotes/210597985/delayed SG:STI -0.19% was last up 0.8%.
The Nikkei was the second Asian stock index to enter a bull market so far this month, with the Shanghai Composite Index rising 20% from a January low last Friday. The mainland Chinese index ended Friday down 0.5%.
On Thursday, Federal Reserve Chairwoman Janet Yellen said an interest-rate increase could happen “relatively soon.” Her comments come amid upbeat data, with the number of Americans applying for first-time unemployment benefits falling to its lowest level since November 1973.
Yellen: Rate hike likely despite election turmoil
Federal Reserve Chairwoman Janet Yellen said she intends to serve her full term as chair through 2018 and that the central bank is on track to raise interest rates despite post-election uncertainties.
Meanwhile, U.S. consumer prices increased in October from a year earlier at the fastest rate in two years. According to CME Group’s FedWatch tool, the likelihood of an interest-rate rise at the Fed’s meeting in December is now higher than 90%.
“It’s all [about] Yellen’s speech,” said Tareck Horchani, deputy head of Asian-Pacific sales trading at Saxo Markets. “All of this pushed the dollar higher…and dollar-yen exploded.”
The dollar /zigman2/quotes/210561789/realtime/sampled USDJPY -0.2257% gained further strength early Friday, rising above the ¥110 mark for the first time in five months.
Japan’s finance minister on Friday said the yen’s recent weakening was a sign of stability returning to the markets, welcoming a reversal in the currency’s uptrend sparked by Donald Trump’s win in the U.S. presidential election.
Japanese exporters caught an updraft from the favorable currency winds as their goods became cheaper to ship around the globe. Chip maker Renesas Electronics /zigman2/quotes/203872935/delayed JP:6723 -0.90% ended up 5.3%, auto maker Suzuki Motor /zigman2/quotes/201794956/delayed JP:7269 -0.31% rose 4.6% and electronics giant Sharp /zigman2/quotes/203224600/delayed JP:6753 -0.54% added 4.1%.
Across the region, financial stocks got an early boost as investors continued to bet that Donald Trump’s presidency could see looser banking regulations and higher interest rates. The S&P/ASX 200 financials subindex in Australia was 0.5% higher, while the Hang Seng financials subindex added 0.4%.
However, shares in Asian emerging markets faced further selling pressure, with analysts expecting more declines, given that rate increases will likely spur a flight of capital back to the U.S. as investors search for higher yields..
“I expect the broad selloff to continue in emerging markets in Asia because I feel if the rates in the U.S. are really going to go up, there is no point putting your money in risky countries,” said Horchani.