Asian share markets have rebounded in relief as oil prices came off the boil and upbeat company earnings pulled investors into tech stocks, while Japan’s first yen-buying intervention in two years steadied the battered currency.
Apple amplified the cheer by beating forecasts and providing an upbeat outlook for sales, though it did warn of chip supply constraints. Its shares rose 2.7 per cent in extended trading, adding to gains of 10 per cent in both Caterpillar and Alphabet as they beat expectations.
Hopes for ever-rising profits saw the S&P 500 climb more than 10 per cent for all of April, while Nasdaq surged 15 per cent in its best performance since 2020. S&P 500 futures were up 0.2 per cent on Friday, with Nasdaq futures firming 0.1 per cent.
April was also a barnstormer for Asia, with Japan’s Nikkei up 16 per cent for the month, Taiwan gaining 23 per cent and South Korea almost 31 per cent.
Market holidays limited the reaction across Asia on Friday, with the Nikkei up 0.4 per cent and Australian shares adding 0.7 per cent. MSCI’s broadest index of Asia-Pacific shares outside Japan edged 0.3 per cent higher.
Asia does remain acutely vulnerable to higher energy prices, importing most of its oil and gas, and oil flows remain badly disrupted through the vital Strait of Hormuz.
Iran said on Thursday it would respond with “long and painful strikes” on US positions if Washington renewed attacks and restated its claim to the strait.
That saw Brent crude firm 1.2 per cent to $US111.70 a barrel, though that was well off Thursday’s four-year peak of $US126.41. US crude rose 0.5 per cent to $US105.64 a barrel.
Currency markets had also come alive after sources said Japanese authorities had intervened on Thursday to sell dollars for yen, initially sending the greenback sliding five whole yen to a two-month low of 155.50.
Yet buyers were back on Friday, lifting the dollar to 157.29 in a sign Tokyo may yet have to do more if it really wants to draw a line at the 160.00 yen barrier.
“The cost is likely to be in the tens of billions of dollars based on history,” said Tim Baker, a macro strategist at Deutsche Bank, referring to the size of the intervention.
“We’re not convinced USD/JPY will keep falling, or even stay here for long,” he argued. “The cross may well be high relative to rates, but it’s actually low relative to a simple model that includes rates, equities and oil.”
Japan imports all its oil and the rise in crude prices is set to sharply widen the country’s trade deficit.
The burst of US dollar sales indirectly lifted the euro to $US1.1729 and away from a three-week trough of $US1.1655. The British pound firmed as far as a 10-week high at $US1.3612.
Both currencies were supported by hawkish commentary from their respective central banks.
The Bank of England warned the fallout from the Iran war could lead to “forceful” rate rises if energy prices kept climbing, and one board member voted for an immediate hike.
European Central Bank President Christine Lagarde said they were debating whether to lift rates and noted that data over the next six weeks would decide the issue.
“The messages conveyed during the press conference leave us with a distinct perception that the consensus among governors is that they will hike policy rates at the next meeting on June 11,” said analysts at Citi in a note.
“We find no reason to alter our expectation of back-to-back rate hikes in June and July.”
That follows a hawkish shift from the Federal Reserve on Wednesday that saw markets give up on any hope for a rate cut there this year.
The pivot left US 10-year Treasury yields up eight basis points on the week at 4.390 per cent, but off a top of 4.436 per cent.
Elsewhere in commodity markets, gold was flat at $SU4,623 an ounce, having been stuck in a tight trading range for more than a month now.
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