Shares advanced Friday in Asia after news that U.S. consumer inflation slowed last month pushed Wall Street benchmarks higher.
Tokyo's Nikkei 225 index fell 1.3% to 26,119.52 on speculation that the Bank of Japan might relent and tighten its ultra-loose monetary policy as the yield on 10-year Japanese government bonds was pushed beyond the central bank's cap of 0.5% on heavy selling ahead of next week's policy setting meeting.
The BOJ has kept its key interest rate at minus 0.1%, maintaining that downward pressure from a likely recession is a bigger risk than inflation, which has remained at relatively moderate levels in Japan.
Shares in Fast Retailing, which shot up earlier in the week on news it would hike wages by as much as 40%, dropped 6.4% after the company reported weaker than expected profit in the previous quarter.
China reported its trade surplus ballooned to a record $877.6 billion in 2022 as exports rose 7% despite weakening U.S. and European demand and anti-virus controls that temporarily shut down Shanghai and other industrial centers. The country’s politically sensitive trade surplus expanded by 29.7% from 2021′s record, already the highest ever for any economy.
Hong Kong's Hang Seng rose 0.5% to 21,621.96 and the Shanghai Composite index climbed 0.5% to 3,180.27. The Kospi in Seoul added 0.4% to 2,388.58, while Australia's S&P/ASX 200 jumped 0.7% to 7,328.10.
Taiwan's benchmark gained 0.6% while Bangkok's SET dropped 0.7%.
On Thursday, the S&P 500 rose 0.3% to 3,983.17. The Dow Jones Industrial Average gained 0.6% to 34,189.97. The Nasdaq advanced 0.6% to 11,001.10
Small company stocks outpaced the broader market. The Russell 2000 picked up 1.7%, to 1,876.06. Every major index is on track for weekly gains.
The report showing inflation slowed in December revived hopes that the Federal Reserve may go easier on the economy, using smaller interest rate hikes to cool prices. Such increases can stifle inflation, but they do so by slowing the economy and risk causing a recession. They also hurt investment prices.
Analysts warned investors not to get carried away. There's still pressure on the economy from high rates and more big swings may still be to come.
Inflation has been easing for six straight months. Even though it slowed to 6.5% last month from its peak of more than 9% in June, that's still high. The Fed has been adamant that it plans to continue raising rates this year and that it sees no rate cuts happening until 2024 at the earliest.
Some areas of the economy remain strong, threatening to keep up the pressure on inflation. Chief among them is the labor market. A report on Thursday showed fewer workers filed for unemployment benefits last week. That's an indication layoffs remain low even though some big tech companies have made high-profile announcements on job cuts.
A strong job market is of course good for workers, particularly when their raises have been failing to keep up with inflation. But the Fed maintains that wage gains could lead companies to raise prices to cover their higher costs and only worsen inflation, even though workers’ wage gains slowed in December.
Earnings reporting season is set to kick off in earnest Friday, with JPMorgan Chase and UnitedHealth Group among the day's headliners. One big worry on Wall Street is that high inflation and a slowing global economy are eating into profits for big companies.
Analysts say this could be the first time earnings per share for S&P 500 companies fall from year-ago levels since 2020.
In other trading Friday, U.S. benchmark crude oil lost 18 cents to $78.21 per barrel in electronic trading on the New York Mercantile Exchange. It gained 98 cents to $78.39 a barrel on Thursday.
Brent crude, the pricing basis for international trading, lost 31 cents to $83.72 per barrel.
The dollar fell to 129.16 Japanese yen from 129.24 yen. The euro slipped to $1.0838 from $1.0849.
