(Jan 23): Asian stocks climbed to a record on Friday and the dollar held its losses as global investors favoured non-US assets amid policy unpredictability and geopolitical risks. Precious metals also set new all-time highs.
The MSCI Asia-Pacific Index gained 0.4% and a gauge of emerging market stocks also hit a record high. Equity-index futures did point to gains for US benchmarks, though of a smaller magnitude than in Asia. Contracts indicated a small loss for European shares.
The yen weakened 0.3% against the dollar after Bank of Japan (BOJ) governor Kazuo Ueda said the central bank may conduct operations for stable yield formation. The comments came after the BOJ kept its policy rate unchanged at 0.75% as expected.
Currencies were in focus as China’s central bank set the yuan’s daily reference rate stronger than the closely watched seven-per-dollar level for the first time since 2023. The dollar held its losses after falling the most in a month. The weak US currency fuelled gains in precious metals with gold climbing to a record of more than US$4,965 ($6,355) an ounce. Silver was within touching distance of US$100 an ounce.
The moves pointed to a gradual unwinding of dollar exposure in favour of regional equities, drawn by more attractive valuations and stronger growth prospects. The shift comes against a backdrop of rising policy uncertainty, including challenges to the US Federal Reserve’s (Fed) independence, and renewed tariff concerns tied to tensions between the US and Europe.
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“The Asian region is far from the geopolitical considerations involving the US, the European Union and Latin America,” said Mabrouk Chetouane, the global head of market strategies at Natixis IM Solutions. “This distance acts as a kind of shield” and allows investors to diversify exposure to “risky assets”, he said.
Signs are growing that market participants are pulling back from US assets. Investors are pouring cash into emerging-market funds at a record pace as momentum builds for a rotation out of US assets, weakening the dollar.
Also, India’s holdings of US Treasuries have fallen to a five-year low as the nation pushes to support its currency and diversify its reserves, joining a broader shift by some major economies out of the world’s biggest bond market.
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Emerging-market assets have broadly rallied amid rising risk appetite. Cheaper valuations and strong economic growth are also in Asia’s favour.
The MSCI Asia-Pacific Index is up 5.5% so far this year, compared with a 1% advance for the S&P 500 Index. Even so, the Asian gauge is trading around a forward price-earnings multiple of 15 times, compared with about 22 times for the US benchmark.
Meanwhile, the BOJ maintained its benchmark rate and issued higher inflation forecasts that leave scope for its next hike to come earlier than the expected timing of summer. The central bank will continue to raise the rate if the economic outlook materialises, Ueda said in a post-decision press briefing.
Also in Japan, Prime Minister Sanae Takaichi dissolved the lower chamber of Parliament to call a snap election for Feb 8.
In the commodities market, the Bloomberg Commodity Spot Index — a broad measure of raw materials, including oil, metals and farm products — has advanced by 3.6% this week. That’s the best weekly performance in about a year, and has lifted the gauge to the highest level since mid-2022.
Investors will be keeping tabs on purchasing managers index data in the US later on Friday for fresh clues on the health of the world’s largest economy. Traders are also paying attention to leadership changes at the Fed as US President Donald Trump said he will soon reveal a successor to chair Jerome Powell.
Back to stocks, the rebound in global equities from a slump earlier in the week underscored how markets remained highly sensitive to shifts in geopolitical tone. Tensions eased after Trump abandoned his threats to impose tariffs on European countries opposed to his plans to acquire Greenland.
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“The recent Greenland episode further strained US-European Union relations and cast even more doubt on the reliability of the US as an economic and security partner,” said Sarah Bianchi of Evercore ISI, in a note on Thursday. “There is a continued gradual diversification away from dollar reserve assets to other currencies and especially gold.”
Corporate highlights:
- Intel Corp shares plunged as much as 14% in late trading after chief executive officer Lip-Bu Tan gave a lacklustre forecast and warned that the chipmaker was struggling with manufacturing problems.
- Trump sued JPMorgan Chase & Co and its CEO Jamie Dimon for at least US$5 billion over allegations that the lender stopped offering him and his businesses banking services for political reasons.
- Capital One Financial Corp agreed to acquire Brex, a financial-technology company that focuses on corporate expense management and accounting, for US$5.15 billion.
- Abbott Laboratories said first-quarter profit will be lower than Wall Street expected after the company was forced to offer discounts on nutrition products to lure price-conscious customers, sending shares plunging.
- China’s securities regulator is considering tightening the criteria for mainland companies to sell shares in Hong Kong, after an offshore fundraising boom raised concerns over deal quality, people familiar with the matter said.
Some of the main moves in markets:
Stocks
- S&P 500 futures had risen 0.2% as of 6.52am London time
- Nasdaq 100 futures rose 0.2%
- The MSCI Asia-Pacific Index rose 0.4%
- The MSCI Emerging Markets Index rose 0.4%
- Hong Kong’s Hang Seng rose 0.3%
- The Shanghai Composite rose 0.2%
- Euro Stoxx 50 futures fell 0.2%
Currencies
- The Bloomberg Dollar Spot Index was little changed
- The euro fell 0.1% to US$1.1743
- The Japanese yen fell 0.3% to 158.93 per dollar
- The offshore yuan was little changed at 6.9597 per dollar
- The British pound fell 0.1% to US$1.3486
Cryptocurrencies
- Bitcoin rose 0.3% to US$89,475.76
- Ether was little changed at US$2,943.43
Bonds
- The yield on 10-year Treasuries was little changed at 4.24%
- Japan’s 10-year yield advanced two basis points to 2.255%
- Australia’s 10-year yield advanced two basis points to 4.82%
Commodities
- Spot gold rose 0.4% to US$4,954.01 an ounce
- West Texas Intermediate crude rose 1% to US$59.96 a barrel
Uploaded by Tham Yek Lee
