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Nikkei Dives on BoJ Bets, Surging Yen; Hang Seng, China Flat

Japan’s market was in turmoil with bets the Bank of Japan was finally ready to hike rates and a rising yen piling the pressure on equities

A stock quotation board displaying Japan's Nikkei average is seen after a ceremony marking the end of trading in 2017 at the Tokyo Stock Exchange (TSE) in Tokyo, Japan, December 29, 2017.
A stock quotation board displaying Japan's Nikkei average in Tokyo, Japan. Photo: Reuters


Asian stocks were largely mixed on Friday, on a day low on risk-taking, as investors played the waiting game with the US Fed over its long-hoped-for interest rates turnaround. 

But that wasn’t the case in Tokyo with the Nikkei heading for its biggest weekly drop in a year while bonds were battered and the yen was eyeing its largest weekly gain in five months.

The yen leapt more than 2% on Thursday and was well-supported on Friday as short sellers fear that a long-awaited rally may have finally begun. The yen hit its strongest on the dollar in four months at 141.6 on Thursday and steadied at 144 to the dollar on Friday, having gained about 5% in three weeks.


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The Nikkei share average lost 1.68%, or 550.45 points, to close at 32,307.86, while the broader Topix was down 1.50%, or 35.44 points, to 2,324.47.

In the past year the Bank of Japan has twice widened and then relaxed its tolerance band for 10-year yields and on Thursday Governor Kazuo Ueda said an “even more challenging” year is ahead, which traders took as a sign of change in the offing. The BOJ is due to set policy rates on December 19.

China stocks edged slightly up but the blue-chip benchmark still hovered around nearly five-year lows, as investors remained cautious about the country’s weak recovery and awaited clues from upcoming policy meetings.

The blue-chip CSI 300 Index added 0.24% and the Shanghai Composite Index rose 0.11%, or 3.35 points, to 2,969.56. The Shenzhen Composite Index on China’s second exchange dropped 0.13%, or 2.42 points, to 1,847.78.

The CSI 300 Index has lost more than 2% so far for the week, as ratings agency Moody’s slapped a downgrade warning on China and Hong Kong’s credit rating, adding to investor concerns about China’s already weak recovery.

Data on Thursday also showed an unexpected shrink in imports, although exports grew for the first time in six months in November.

Hong Kong-listed tech giants edged up 0.3% but the Hang Seng Index fell back 0.07%, or 11.52 points, to 16,334.37. The Hang Seng China Enterprises Index retreated 0.31%.

Elsewhere across the region, Indian stocks advanced with Mumbai’s signature Nifty 50 index up 0.34%, or 71.00 points, at 20,972.15. Beyond Japan, the MSCI’s broadest index of Asia-Pacific shares bounced 0.8%.


Crude at Five-Month Low

In broader markets, after US jobless claims met expectations, the focus is now on whether non-farm payrolls figures will reflect signs that the job market is slowing.

Economists expect 180,000 jobs were added last month and an upside surprise may unleash a strong reaction if traders dial back bets on more than 125 basis points of Fed rate cuts next year.

In currency trade, the Australian dollar, weighed by a slowing economy and traders’ perception that the central bank is turning dovish, was set to snap a three-week winning streak with a 0.9% drop this week to $0.6613.

Brent crude futures touched a five-month low on Thursday, before recovering slightly to $75.17 a barrel in Asia trade. Oil is set for a 4.6% fall this week.

Gold, having touched a record high early in the week before recoiling, was clinging on at $2,032 an ounce.

Bitcoin is eying an eighth consecutive weekly gain on expectations that US interest rates have peaked and anticipation that a bitcoin ETF might be approved. It last bought $43,437.


Key figures

Tokyo – Nikkei 225 < DOWN 1.68% at 32,307.86 (close)

Hong Kong – Hang Seng Index < DOWN 0.07% at 16,334.37 (close)

Shanghai – Composite > UP 0.11% at 2,969.56 (close)

London – FTSE 100 > UP 0.42% at 7,545.34 (0934 GMT)

New York – Dow > UP 0.17% at 36,117.38 (Thursday close)


  • Reuters with additional editing by Sean O’Meara


Read more:

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EU Leaders Meet Xi in Beijing Amid Concern on Trade Imbalance

December Highs Take India’s Market Cap to Record $4.2 Trillion

Nikkei Slides as Rates Fears Weigh, Tech Weighs on Hang Seng



Sean O'Meara

Sean O'Meara is an Editor at Asia Financial. He has been a newspaper man for more than 30 years, working at local, regional and national titles in the UK as a writer, sub-editor, page designer and print editor. A football, cricket and rugby fan, he has a particular interest in sports finance.


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