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Asia shares on a roll as SNB kicks off rate cuts
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An electronic screen displays Japan's Nikkei share average in Tokyo on March 4, 2024. (Reuters/Kim Kyung-Hoon)
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sian stocks were near a weekly gain on Friday and the Nikkei charged to a record high, riding a rally from its global counterparts after a surprise rate cut from the Swiss National Bank had investors wagering who could be next.
The SNB's 25 basis point rate cut on Thursday proved a shot in the arm for global risk sentiment as markets raced ahead to bet on big central banks lowering borrowing costs this year, sending Wall Street closing at record highs.
MSCI's broadest index of Asia-Pacific shares outside Japan ran into some profit taking in early trade on Friday after jumping nearly 2 percent in the previous session, and was last 0.17 percent lower. Still, the index was on track to gain more than 1 percent for the week.
Other benchmarks in Asia also scaled new peaks, with Japan's Nikkei and the Taiwan weighted index charging to record highs. Both were on track for a weekly gain of nearly 6 percent and 3 percent, respectively.
South Korea's KOSPI similarly hit a two-year top.
"It doesn't hurt if central banks are easing, that's for sure," said Rob Carnell, ING's regional head of research for Asia-Pacific. "I'd expect this is going to provide further support if people start to eye more prospects of easing."
Traders were quick to ramp up bets on a June cut by the European Central Bank (ECB) and the Bank of England (BoE) following the SNB's move.
BoE Governor Andrew Bailey said on Thursday after the central bank's rate decision that the British economy is moving toward the point where rates can begin easing, as two of his colleagues also dropped their calls for additional increases.
Sterling fell to a three-week low in the wake of the BoE's decision, and was last 0.11 percent higher at $1.26735. It was headed for a weekly loss of more than 0.4 percent.
The Swiss franc edged marginally lower to 0.8980 per dollar, having fallen more than 1 percent in the previous session to a four-month trough.
It was pinned near a roughly eight-month low on the euro.
"The SNB's decision to cut rates this month will likely further the probability that the [franc] could be used as a funding currency particularly if the SNB signals that it is prepared to match ECB rate cuts this year," said Jane Foley, senior FX strategist at Rabobank. "For now, the [franc] is likely to remain soft."
Elsewhere, stocks in China and Hong Kong were a sea of red, with the blue-chip index down more than 0.5 percent and the Hang Seng Index nearly 2 percent weaker, thanks to the yuan's slide past the 7.2 per dollar level for the first time since November.
DOLLAR RESILIENCE
Although the US Federal Reserve's decision this week to stick to its projection of three rate cuts this year turned out to be more dovish than some had expected and sent the dollar falling, it was quick to recoup losses.
The dollar pushed the yen closer to a multi-decade low on Friday and was last at 151.82, leading Japanese government officials to ramp up their jawboning efforts.
The greenback's rebound has come on the back of yet another run of resilient US economic data and as a landmark rate increase from the Bank of Japan this week failed to move the needle on the stark interest rate differentials between the two countries.
The euro likewise fell 0.08 percent to $1.0850, having traded in a tight range for most of the year.
"The market has been completely obsessed with this idea of a dollar turn for more than a year," said ING's Carnell. "It looks highly questionable if you look at how strong the US economy is.
"It just doesn't seem that there's an automatic sense that when the Fed cuts rates, there's got to be some dollar easing if the ECB and other central banks in the G10 in particular, are doing the same or perhaps even more."
In commodities, Brent fell 43 cents to $85.35 a barrel, while US crude eased 41 cents to $80.66 per barrel.
Spot gold was down 0.28 percent at $2,174.89 an ounce, after hitting an all-time high on Thursday.
