SINGAPORE: Asian shares rose to a four-month high on Friday as US economic data stoked expectations that the Federal Reserve is near the end of its rate-hike campaign, while the yen fell after the Bank of Japan maintained its ultra-easy monetary policy.
MSCI's broadest index of Asia-Pacific shares outside Japan was 0.75 per cent higher and on course for 2.8 per cent gain in the week, its best weekly performance since January.
But futures indicated European markets were set for a more subdued start, with the Eurostoxx 50 futures up 0.05 per cent, German DAX futures up 0.10 per cent and FTSE futures down 0.03 per cent. E-mini futures for the S&P 500 eased 0.12 per cent.
The BOJ rounded up a central bank heavy week, keeping its pledge to "patiently" sustain massive stimulus to ensure Japan sustainably achieves its 2 per cent inflation target accompanied by wage hikes.
As widely expected, the BOJ maintained its -0.1 per cent short-term interest rate target and a 0 per cent cap on the 10-year bond yield set under its yield curve control (YCC) policy.
Investors were awaiting Governor Kazuo Ueda's press conference for his views on inflation, the policy outlook and the yen's renewed declines.
"Comments around FX from Ueda will be key to watch at the press conference given the recent pressure on yen, but my sense is that BOJ will look at that as temporary and is unlikely to react," said Charu Chanana, market strategist at Saxo Markets.
The yen weakened 0.25 per cent to 140.68 per dollar, below the seven-month low of 141.50 it touched on Thursday. The Nikkei turned positive after the BOJ decision, recouping early losses, was last up 0.45 per cent, set 10th straight week of gains.
Nikko Asset Management chief global strategist John Vail said the meeting was not a surprise and the changing expectations of when the BOJ would tweak YCC could pressure the yen.
"Anyone who shorts the yen should know that if it gets much weaker, the Japanese government will likely intervene quickly and with little warning."
China's stock markets extended gains after the central bank cut the borrowing cost of its medium-term policy loans on Thursday for the first time in 10 months to aid a shaky economic recovery. Investors are hoping more stimulus is on the horizon.
China's benchmark CSI 300 Index was 0.52 per cent higher while Hong Kong's Hang Seng Index gained 0.8 per cent.
The S&P 500 and Nasdaq surged on Thursday to close at their highest in 14 months after data showed US retail sales unexpectedly rose in May, while US jobless claims came in higher than expected.
"If US labour markets are finally starting to soften, this lends some credibility to the Fed's decision to pause," said Ryan Brandham, head of global capital markets, North America at Validus Risk Management.
The slew of data helped firm up bets that the Fed would not follow through with more rate hikes as the central bank hinted on Wednesday when it left interest rates unchanged.
Markets are now pricing in 69 per cent chance of the US central bank raising its interest rate by 25 basis points next month, according to CME FedWatch tool.
The European Central Bank on Thursday left the door open to more rate hikes as it flagged risks from rising wages and revised up its inflation projections. The ECB also raised interest rates by 25 bps taking its policy rate to 3.5 per cent, a level not seen since 2001.
"(ECB President) Lagarde insisted that there was more ground to cover, but the overall tone of the press conference suggested that there might not be a whole lot more to do, despite the upgrade to the inflation forecast," strategists from NatWest Markets said in a note.
In the currency market, the euro was at $1.0939, hovering close to one-month high it touched on Thursday after the ECB decision.
The dollar index, which measures the US currency against six major peers, was at 102.22, drifting near a one-month low of 102.08 it touched overnight.
The two-year US Treasury yield, which typically moves in step with interest rate expectations, was up 2.8 basis points at 4.676 per cent in Asian hours.
Oil prices eased, taking a pause from the previous session when futures gained steeply on optimism around higher energy demand from top crude importer China.
US West Texas Intermediate crude eased 0.34 per cent to $70.38 per barrel and Brent was at $75.42, down 0.33 per cent on the day. - Reuters
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