Asian Markets Advance as Tech Rally Lifts Sentiment, Yen Slides Despite Rate Hike

BY COMFORT OGBONNA

Asian share markets edged higher on Monday, taking their cue from technology-led gains on Wall Street, while the Japanese yen languished at historic lows against the euro and Swiss franc, underscoring persistent pressure on/or currency markets despite higher interest rates at home.

Trading volumes were relatively thin as much of the world entered a holiday-shortened week, but market momentum remained tilted to the upside. Investors appeared willing to add risk ahead of delayed U.S. economic data that is expected to confirm the world’s largest economy continued to expand at a robust pace in the third quarter. Consensus forecasts point to annualised growth of around 3.2%, supported in part by a sharp pullback in imports following a surge earlier in the year ahead of new tariff measures.

Even so, some analysts urged caution, warning that optimism may have become stretched. Strategists at Bank of America noted that their proprietary measure of investor sentiment had climbed to 8.5, a level considered extremely bullish and often associated with market reversals.

Historically, readings above 8.0 have tended to precede pullbacks, with global equities falling a median 2.7% over the subsequent two months. They added that fund manager surveys show the most bullish positioning in more than three years, driven by expectations of interest rate cuts, tariff relief and tax reductions.

For now, the fear of missing out appeared to outweigh such concerns. Futures tied to the S&P 500 rose a further 0.2%, while Nasdaq futures gained 0.3%, extending the positive tone set late last week.

In Asia, Japan’s Nikkei climbed 1.5%, building on Friday’s rebound as the sharp slide in the yen boosted prospects for export-oriented companies. The currency weakened further even after the Bank of Japan raised interest rates to a 30-year high of 0.75%, a move that instead triggered heavy selling in government bonds. Yields on 10-year Japanese debt rose another 2.5 basis points to their highest level since 1999.

Attention is now turning to the release of the central bank’s meeting minutes on Wednesday, while the Bank of Japan governor is scheduled to address a major business lobby on Christmas Day, events that could provide further insight into the policy outlook.

The yen fell to fresh record lows against the euro at 184.90 and the Swiss franc at 198.08. Against the dollar, it weakened to 157.67, though traders were cautious about pushing beyond the November high of 157.90 amid the risk of official intervention. Japan’s top currency official signalled concern over one-sided moves and warned that appropriate action could be taken to counter excessive declines. A clear break above 158.00 could open the way toward the 2025 peak of 158.88 and eventually the 2024 high near 162.00.

Elsewhere in the region, MSCI’s broad index of Asia-Pacific shares outside Japan rose 0.3%. South Korean stocks jumped 1.8%, buoyed by optimism surrounding artificial intelligence-linked earnings growth. Analysts at TD Securities highlighted that global equity markets recorded their largest weekly inflows on record last week, totalling $98 billion, led by strong demand for U.S. equity funds. Chinese equity funds attracted their third-largest weekly inflow of the year, while emerging markets saw their biggest inflows since April.

Bond markets, however, showed signs of cooling, with fund flows slowing for a fourth consecutive week. U.S. 10-year Treasury yields edged up to 4.157%, reflecting lingering concerns about inflation and interest rate trajectories.

In commodities, silver continued to shine, surging to a fresh record of $67.48 per ounce and lifting its gains for the year to nearly 134%. Gold also advanced, rising 0.6% to $4,362 an ounce as investors maintained exposure to precious metals.

Oil prices moved higher after U.S. authorities intercepted a Venezuelan oil tanker over the weekend and pursued another vessel, marking the third such operation in less than two weeks. Brent crude firmed 0.7% to $60.88 a barrel, while U.S. crude climbed 0.7% to $56.89 per barrel, adding to the cautious optimism across broader markets.