By Stella Qiu
SYDNEY (Reuters) – Japan’s Nikkei closed at another 34-year peak on Friday, helped higher by a buoyant Wall Street, while the dollar found its footing after a big fall in U.S. retail sales revived chances of a June rate cut.
The rally in Asia is set to extend to Europe, with EUROSTOXX 50 futures up 0.5%. Nasdaq futures rose 0.2% and S&P 500 futures were flat.
The of the all-time high of 38,957 points, hit in 1989. The index is up 4.3% for the week, the third straight week of gains, bringing the year-to-date gains to a staggering 15%.
MSCI’s broadest index of Asia-Pacific shares outside Japan rose 0.9%, helped by a 2.6% jump in Hong Kong’s Hang Seng index after returning from the Lunar New Year holidays. The index was up 1.9% for the week.
Mainland China remained closed on Friday.
Bank of Japan Governor Kazuo Ueda said on Friday that monetary policy would most likely remain accommodative, even after ending negative interest rates, echoing recent reassurances from BOJ officials that have weighed on the yen.
The yen eased 0.2% on Friday to 150.26 per dollar, back above the critical 150 level that could draw possible Japanese intervention to slow the currency’s declines.
“The dollar/yen has sort of consolidated around the 150 level, so that’s providing support (to Nikkei). There’s the corporate reform still going through, so the exporters will continue to do well,” said Tony Sycamore, market analyst at IG.
Figures on Thursday showed that Japan and Britain slipped into recession at the end of last year, and U.S. retail sales last month fell much more than expected. But the upshot of that could be relatively looser monetary policy.
“I think the demand picture is certainly starting to fracture in some of the developed market economies,” said Sycamore. “So it does bring forward the idea of rate cuts.”
Overnight, data showed the U.S. retail sales fell by 0.8% in January, the sharpest drop in 10 months.
Markets moved to fully price in a rate cut from the Federal Reserve in June, reversing some of the price action after a stronger-than-expected U.S. inflation report prompted traders to give up bets for early rate relief.
That cheered Wall Street, with the S&P 500 gaining 0.6%, the Nasdaq Composite up 0.30% and Dow Jones Industrial Average firming 0.9%.
The repositioning in interest rate expectations weighed on the dollar, but it rebounded 0.1% to 104.41 against its peers on Friday, after losing 0.4% overnight.
Treasury yields bounced after dipping overnight. The yield on benchmark 10-year notes rose 2 basis points at 4.2576%, after slipping 3 basis points overnight. It was still up 8 basis points for the week.
Traders are awaiting produce price data later in the day for more clues on Fed policy.
Oil prices were mixed on Friday after jumping the previous session. The International Energy Agency (IEA) on Thursday flagged slowing demand growth this year.
Brent eased 0.1% to $82.81, while U.S. crude edged 0.1% higher to $78.12 per barrel.
The spot gold price was flat at $2,003.09.
(Reporting by Stella Qiu. Editing by Sam Holmes and Gerry Doyle.)
