Nikkei Gains 1.4% After BoJ Rate Hike to 31-Year High
Asian equities closed higher on Friday, driven by a 1.4% jump in the Nikkei 225 and a 2.7% surge in the Kospi. European benchmarks, however, traded lower in early sessions. The divergence reflects mixed reactions to recent central bank actions and shifting oil prices.
The Bank of Japan raised its benchmark interest rate to 1.25% from 1.0%. This marks the highest level in 31 years. The move followed the Federal Reserve's decision to hike the federal funds rate by a quarter of a percentage point earlier in the week. Traders had widely expected the Japanese central bank's action, which aims to address the weakening yen.
The Nikkei 225 finished the day up 1.4% at 65,018.95. South Korea's Kospi index jumped 2.7% to close at 6,894.23. In Europe, the CAC 40 fell 0.6% to 8,136.51. The DAX slipped 0.5% to 25,577.02, and the FTSE 100 dropped 0.8% to 10,730.39. These early European losses contrasted with the strength seen in Asian markets.
Oil prices ease from weekly peaks
Brent crude oil lost 2.15% to trade at $102.57 per barrel. U.S. benchmark crude slid 1.92% to $99.95 per barrel. Earlier in the week, Brent had approached $110 on concerns about supply disruptions in the Middle East. The recent decline in oil costs has helped support equity markets by reducing inflationary pressure.
Currency pairs reflect policy shifts
The U.S. dollar strengthened against the Japanese yen, rising to 157.73 from 155.95. The euro edged up to $1.1486 from $1.1480. Despite recent joint interventions by the U.S. and Japan to support the yen, the currency continued to face downward pressure. The Federal Reserve signaled it may raise rates one more time this year to control high inflation.
Global sentiment remains mixed
Wall Street futures pointed to higher opening values, with the S&P 500 up 0.3%. The Dow Jones futures rose 0.2%. Asian markets benefited from this positive U.S. outlook and falling energy costs. However, European investors remained cautious, leading to the early session declines in major benchmarks. Data from GN auto markets/energy: crude oil prices highlights the ongoing volatility in the energy sector.
