Asian Markets Steady Ahead of US Data; BOJ Policy Speculation Weighs on Nikkei

Asian markets maintained stability on Thursday, holding close to recent highs, as investors awaited crucial data from the United States. Meanwhile, anticipation surrounding a potential policy adjustment from the Bank of Japan (BOJ) added pressure to Japan's Nikkei index.

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The Nikkei in Japan managed to halt its recent losing streak but remained on course for its largest weekly decline in three months. Investors are closely monitoring the upcoming BOJ meeting amid speculation of a policy pivot.

Across the region, most Asian shares saw minimal movement, with MSCI's broadest index of Asia-Pacific shares, excluding Japan, hovering near a seven-month peak achieved earlier. Despite higher-than-expected inflation data from the United States, traders largely remained unfazed.

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In the futures market, S&P 500 and Nasdaq futures saw modest gains, while EUROSTOXX 50 futures experienced a slight decline.

Market attention now turns to the release of US producer price data later in the day, which will influence the core personal consumption expenditures (PCE) price index, as well as retail sales figures for February.

The core PCE index is closely monitored by the US Federal Reserve and will play a significant role in discussions at the upcoming policy meeting regarding the possibility of interest rate adjustments.

Analysts at Wells Fargo noted, "Since the FOMC last met, the US inflation data have come in a bit stronger than expected, while the labor market generally has remained resilient."

Despite these developments, the US dollar continued to struggle against recent lows, with market focus on the potential for lower US interest rates by the end of the year.

In China, both the blue-chip CSI300 Index and the Shanghai Composite Index saw declines of over 0.6%, while Hong Kong's Hang Seng Index dropped by 1%, largely driven by losses in technology stocks.

The downturn in Chinese markets was partly attributed to news regarding a Washington-based global trade association's decision to "separate" from its Chinese member, Wuxi AppTec, resulting in a sharp decline in the latter's share prices.

In Japan, speculation surrounding the BOJ's possible termination of negative interest rates as early as next week boosted domestic yields. Yields on Japanese government bonds (JGBs) reached multi-week highs on Thursday, while the yen slightly eased against the US dollar.

Market observers have increasingly factored in the possibility of a policy shift in March, particularly following reports of substantial pay hikes during Japan's annual wage negotiations. A preliminary survey on wage talks at major firms is scheduled for release on Friday, with BOJ policymakers emphasizing the importance of these discussions in determining the timing of the central bank's stimulus withdrawal.

Yujiro Goto, head of FX strategy for Japan at Nomura, commented, "I think an earlier decision to scrap NIRP (negative interest rate policy) in March will suggest that the BOJ's confidence in achieving its 2% inflation target is much stronger, so I think that could have some impact on market expectations for the pace of rate hikes beyond the first decision to scrap NIRP."

In commodity markets, Brent crude edged up slightly to $84.07 a barrel, while US crude remained steady at $79.72 per barrel. Spot gold experienced a slight decline to $2,168.69 an ounce.

Also Read: Global Markets Await US Inflation Data; Yen Declines, Gold Holds Steady