The buzz sent the chipmaking sector surging around the world over the past 24 hours, with TSMC’s Taipei-listed shares jumping 6.5% on Friday.
Tokyo’s Nikkei, one of the darlings of 2024 so far and up 7.5% in the year to date, jumped back 1.4% toward Wednesday’s 34-year high – aided by the chip rally and soft core inflation readings that leave the Bank of Japan in no rush to tighten its easy money policy.
Bank of America said fund data showed the largest inflow in 12 weeks into Japanese stocks this week.
Wall St stocks had already picked up the baton and run with it on Thursday, coming back within 1% of its record high set two years ago. The Nasdaq 100 jumped 1.5%.
Futures look set to extend those gains on Friday, with regional U.S. banks topping the earnings season diary.
There was also some relief that Congress once again averted a government shutdown by today’s funding deadline, even though it’s merely kicked issues six weeks down the line.
The U.S. House of Representatives on Thursday approved a stopgap bill to fund the federal government through early March, sending it to President Joe Biden for final approval.
But any balm for the Treasury market was challenged by another sign the U.S. labour market remains red hot – with weekly jobless sliding to a 16-month low and again questioning the sort of aggressive Federal Reserve easing path still priced into markets. Futures are still more than 50% priced for a first rate cut in March.
On the flipside, the Philadelphia Fed’s latest business survey for January showed a sharp drop in sentiment, activity and prices paid. And the housing starts readout was more mixed.
Existing home sales top the list on Friday, with an eye on the University of Michigan’s latest household survey for this month.
The upshot in bond markets is that 10-year Treasury yields nudged up to another one-month high – although the short end of the curve was more restrained and traders kept a close eye on this year’s 2-10 year yield curve disinversion. The dollar slipped back further from recent highs, and recoiled from its highest level since November against the yen.
Markets continue to monitor elevated container shipping prices amid Red Sea disruptions for any sign they may spur more general price rises and complicate the disinflation picture for central banks.
But disrupted trade routes are acting as a hit on economic activity too, not least in China – where the economy was already under considerable pressure from a property bust and foreign capital flight.
