Asia Stocks Climb as Wall Street Rebounds, Markets Brace for BOJ Rate Hike

Economic

Stocks

Summary:

Asian equities rose on Friday, mirroring Wall Street’s tech-led rally, while investors turned their attention to an anticipated Bank of Japan rate hike and its potential implications for the yen, bonds, and regional currencies...

Wall Street Momentum Lifts Asian Sentiment

Equity markets across Asia rebounded on Friday, buoyed by a positive lead from Wall Street where strong earnings from Micron Technology fueled a tech rally. Japan’s Nikkei gained 0.6%, South Korea’s KOSPI rose 1.2%, and the MSCI Asia-Pacific index (excluding Japan) edged 0.2% higher, showing regional investors were willing to follow the global risk-on mood despite looming policy decisions.

The rally was sparked by U.S. inflation data showing a sharper-than-expected slowdown in consumer price growth to 2.7%. While this initially sparked dovish enthusiasm, analysts cautioned that the figures were skewed by missing data due to the recent U.S. government shutdown. Consequently, market participants have been reluctant to fully trust the report as a reliable guide for Federal Reserve policy.

BOJ Hike Expected but Forward Guidance Holds Greater Weight

Traders are almost certain the Bank of Japan will raise its short-term policy rate by 25 basis points to 0.75% later in the day, bringing it to the highest level since 1995. The key market focus, however, is not the hike itself which is nearly fully priced in but rather Governor Kazuo Ueda’s tone regarding future rate increases.

Expectations have coalesced around the possibility of just one more hike to 1.0% by 2026. Any suggestion that the BOJ might accelerate this timeline or raise rates beyond 1.0% could trigger a shift in bond and currency markets. On the flip side, a cautious or non-committal stance could pressure the yen further, keeping it vulnerable to depreciation.

Analysts at the Commonwealth Bank of Australia argued that Japan’s policy rate remains stimulatory and further normalization is warranted. Persistent core inflation, which remained at 3.0% in November for the second straight month, along with recent yen weakness, is expected to keep price pressures elevated.

Currency Markets Await Direction Amid Diverging Central Bank Paths

The Japanese yen was little changed at 155.60 to the dollar, remaining within its recent range between 154.34 and 156.96. Its trajectory now depends on whether the BOJ signals a steady tightening path or opts for a wait-and-see approach. A dovish tone could renew pressure on the currency, while a hawkish shift may help stabilize it.

Elsewhere in currency markets, the euro traded flat at $1.1725, after European Central Bank President Christine Lagarde provided no forward guidance, effectively sidelining hawkish expectations. The ECB kept rates at 2.0% and gave no clear timeline for easing, implying policy is on hold for an extended period.

The British pound hovered around $1.3378 after the Bank of England cut its benchmark rate to 3.75% in a narrow 5–4 vote. Despite the cut, the divided decision has limited the scope for aggressive easing, as policymakers signaled caution on future rate reductions. Central banks in Sweden and Norway also kept rates steady, though Norway left the door open for potential cuts in 2026.

Bond Markets Steady as Inflation Data Remain Clouded

Bond yields were broadly stable following the U.S. CPI release. The 10-year Treasury yield held at 4.126%, below its recent high of 4.209%, while Japan’s 10-year government bond yield matched its 18-year peak at 1.980%. Although the CPI numbers hinted at easing inflation, markets remained cautious due to data collection issues during the U.S. shutdown.

Federal Reserve rate-cut expectations saw only minor changes, with the probability of a January cut implied at 27%, while March increased modestly to 58%. The limited movement suggests traders are waiting for cleaner economic data before reassessing the Fed’s next steps.

Commodities Show Mixed Momentum

Gold traded at $4,333 an ounce, slightly below its October peak of $4,381, as investors took profits amid cautious inflation signals. Silver pulled back after a recent surge, while palladium and platinum continued to find support from industrial demand.

Oil prices edged higher, supported by the potential for new U.S. sanctions on Russia and uncertainty surrounding Venezuelan oil exports. Brent crude rose 0.2% to $62.04 a barrel, while U.S. crude also gained 0.2% to $58.35.

Markets on Alert Ahead of BOJ Signals

While Asian equities enjoyed a short-term lift from Wall Street’s tech rally and cooling U.S. inflation, investors remain highly sensitive to central bank signals particularly from the Bank of Japan. With interest rates set to rise, the yen’s stability and the trajectory of Japan’s bond market hinge on Governor Ueda’s messaging.

The divergence in global monetary policies between the BOJ’s tightening, the ECB’s hawkish hold, and the BOE’s cautious cut has created a complex landscape for investors navigating currencies, equities, and commodities into the final weeks of 2025. The next round of central bank decisions will likely determine whether this rally finds solid footing or falters under the weight of economic uncertainty.

Source: Reuters

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Samantha Luan

Forex

Economic

The Indian rupee is likely to hold on to central bank-led recovery on Friday, with softer U.S. inflation offering incremental support, although doubts over the data and potential dollar demand from corporates may cap upside.

The 1-month non-deliverable forward indicated the rupeewill open slightly higher-to-flat versus the U.S. dollar, having settled at 90.24 on Thursday.

The rupee has rallied from around 91 per dollar to current levels, a move that began with heavy Reserve Bank of India intervention soon after the market opened on Wednesday.

Bankers said the central bank stepped in aggressively to disrupt the one-way depreciation pressure that had built up in the currency, triggering position unwinds.

"The RBI has, for now, broken the one-way (higher dollar/rupee) cycle. However, the recovery still looks tentative and more corrective than directional," a senior FX trader at a private bank said.

He noted that economists are flagging concerns over the U.S. inflation data, which caps the spillover benefit for the rupee, adding that he expects substantial dollar-buying interest in the 90–90.20 area.

U.S. consumer prices rose 2.7% year-on-year in November, slowing from a 3.0% increase in the 12 months through September and undershooting expectations of 3.1% print.

Data collection for October was disrupted by the federal shutdown, preventing the publishing of month-to-month changes for November's CPI - creating voids that economists said made the report less reliable than normal.

Economists at Morgan Stanley noted that the weakness in both goods and services could be partly due to methodological issues.

"If these technical factors are the main source of weakness, we could see a re-acceleration later," it said in a note.

While the downside surprise supports the case for further Federal Reserve rate cuts, uncertainty over the data due to the shutdown are likely to limit its impact to an extent, ANZ Bank said in a note.

Source: TradingView

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Justin

Political

Forex

Economic

China–U.S. Trade War

A liquefied natural gas tanker linked to a Chinese company docked at a US-sanctioned Russian export project for the first time, the latest step by Moscow and Beijing to strengthen energy ties and skirt western curbs.

The Kunpeng, which earlier this year had its ownership and management transfered to little-known firms in China and the Marshall Islands, docked at Gazprom PJSC's Portovaya plant in the Baltic Sea, according to ship-tracking data compiled by Bloomberg. Portovaya is a relatively small export plant that was sanctioned in January by former President Joe Biden's administration.

China, which doesn't recognize the unilateral sanctions, is stepping up its efforts to import Russian gas blacklisted by western nations via so-called shadow fleet vessels. The Asian nation imported its first shipment from the Portovaya facility earlier this month.

The move comes as US President Donald Trump is increasing the pressure on Russia to end the war in Ukraine. Washington is preparing a fresh round of sanctions on Moscow's energy sector, including its shadow fleet, should President Vladimir Putin reject a peace agreement.

Source: Bloomberg Europe

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Winkelmann

Forex

Commodity

Nickel advanced for a third day, extending its rebound from an eight-month low on the prospect of reduced supply from top producer Indonesia.

The metal rose as much as 1.5% on Friday, two days after Indonesia proposed cutting nickel ore production in 2026. The government's work plan budget for next year envisages output of about 250 million tons, down from this year's goal of 379 million tons.

The planned reduction is a response to a slump in nickel prices. The metal, used in stainless steel and electric vehicle batteries, has fallen more than 3% this year and is the only industrial metal on the London Metal Exchange on track for an annual decline. As well as Indonesia, China has raised production at a level outpacing global demand.

Indonesia's plan presents "a risk" for bearish investors at a time when nickel prices have sunk to near the cost of production in the country, said Gao Yin, an analyst at China's Shuohe Asset Management Co. The exit of investors from arbitrage trades involving base metals such as copper and aluminum might also have contributed to this week's gains, she said.

In addition to the proposed reduction in mining, Indonesia's Ministry of Energy and Mineral Resources plans to revise its benchmark pricing formula for nickel ore in early 2026, a move that would classify byproducts such as cobalt as separate commodities subject to royalties, Bloomberg Technoz reported, citing Indonesian Nickel Miners Association Secretary General Meidy Katrin Lengkey.

Most industrial metals have risen this year. Copper has gained around a third, hitting a record $11,952 a ton last week, as robust global demand for a metal crucial to the green transition has coincided with supply disruptions and stockpiling of the metal in the US.

Nickel rose 1.5% to $14,855 a ton on the LME as of 11:10 a.m. in Shanghai. It has gained more than 4% since closing at $14,263 on Tuesday, its lowest since April 9. Copper slipped 0.4% to $11,732 and aluminum edged down 0.1% to $2,914.

Source: Bloomberg Europe

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Gerik

Economic

Commodity

Crude Benchmarks Extend Losses on Reduced Geopolitical Premium

In early Friday trading, Brent crude fell 9 cents to $59.73 a barrel, while U.S. West Texas Intermediate (WTI) dropped 16 cents to $55.99. On a weekly basis, both contracts were down more than 2%, positioning oil for its second straight weekly decline. The pullback reflects a shift in market sentiment away from supply disruption fears toward geopolitical de-escalation.

The key driver behind the bearish tone was U.S. President Donald Trump’s Thursday statement expressing belief that a breakthrough in Russia-Ukraine peace talks may be near. The market interpreted this as a potential easing of geopolitical tensions that had previously supported risk premiums in oil prices.

Venezuelan Blockade Raises Questions but Fails to Offset Demand Outlook

While markets are still digesting Trump’s recent announcement of a blockade on sanctioned Venezuelan oil tankers, the impact on global supply remains uncertain. Venezuela contributes around 1% of global oil production, and the U.S. has not yet clarified how enforcement of the blockade will be managed.

The U.S. Coast Guard’s seizure of a Venezuelan tanker last week marked an unusual escalation, but the market has so far reacted cautiously, given the lack of follow-up details. On Thursday, Venezuela authorized two unsanctioned large crude carriers to depart for China, further complicating the enforcement narrative and undermining the perceived effectiveness of the blockade.

Analyst Tony Sycamore of IG noted that the combination of enforcement uncertainty and hopes for a U.S.-brokered peace settlement in Ukraine is calming supply-side fears and softening risk premiums.

Technical Levels and Market Positioning Add Pressure

Technically, oil markets are navigating key support and resistance zones. According to Sycamore, a rally above the $56.70–$56.90 range in WTI could suggest this week’s drop to $54.98 was a false breakdown. However, a breach below that level could trigger further downside pressure.

Bank of America analysts added that while falling prices could threaten market stability, they may also curtail future supply especially among higher-cost producers thereby setting a floor under prices. Still, with the current narrative shifting from escalation to diplomacy, speculative positioning appears tilted toward caution rather than bullish conviction.

Diplomatic Optimism Temporarily Overrides Supply Shock Risks

Oil’s continued weakness reflects a growing divergence between the fading geopolitical risk premium and unresolved concerns over sanctions enforcement. While the Venezuelan blockade and potential new measures against Russian exports could pose future threats to supply, current market dynamics are being shaped more by sentiment and perceived progress toward de-escalation.

Unless concrete disruptions materialize or the Russia-Ukraine peace narrative unravels, oil prices may remain subdued, with traders watching closely for technical confirmation of either a rebound or deeper correction. In the interim, energy markets appear to be pricing in more calm than conflict.

Source: Reuters

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Samantha Luan

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Political

Economic

The Bank of Japan on Friday went ahead with the interest rate increase it had been foreshadowing, its first such move in 11 months and one that was made easier by wage growth momentum and receding uncertainty surrounding the impact of U.S. tariffs.

Following a two-day board meeting, the central bank announced that it will bump up its policy rate, an uncollateralized overnight call rate, by 25 basis points to 0.75%. This will be the BOJ's fourth interest rate increase since it exited from negative rates in March 2024.

The bank last hiked rates in January but then put its normalization cycle on pause due to U.S. President Donald Trump's tariff onslaught. Since then, Tokyo and Washington have reached a deal on tariffs, easing anxiety over policy uncertainty.

Board members have been laying the groundwork for a hike. Earlier this month, Gov. Kazuo Ueda hinted that an increase was on the table. At the BOJ's last meeting in October, two of the nine board members suggested a rate increase.

The BOJ's latest Tankan survey, released on Monday, reflected improving business sentiment among large manufacturers, in part thanks to the weak yen.

BOJ Raises Rates, Encouraged By Resilient Business And Wage Growth_1

Wage-growth momentum has been another key measure Ueda has focused on. Positive signs in nominal wage growth -- major unions are preparing to demand a pay raise next fiscal year -- and a tight labor market supported the BOJ's decision to hike rates.

The market largely predicted the BOJ would move ahead with an increase. Data from Totan Research and Totan ICAP as of Thursday put the implied probability of a December rate hike at 97%.

The BOJ's decision comes after the U.S. Federal Reserve last week lowered interest rates for the third time this year.

All eyes are now on BOJ chief Ueda's press conference this afternoon. Market watchers will pay close attention to any comments that might indicate whether the board feels the terminally weak yen calls for the bank to speed up its rate hike cycle.

Source: Asia_Nikkei

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FastBull Featured

Daily News

[Quick Facts]

1. Gaza Ceasefire mediators to meet in U.S. for the second phase negotiation.

2. U.S. November inflation cools but faces skepticism.

3. ECB officials say rate-cut cycle may have ended.

4. Bank of England cuts rates by 25 bps, pace of easing to slow.

5. Trump: Next Fed Chair must be "Uber Dovish".

6. ECB holds rates steady, raises inflation forecasts.

7. Goolsbee: CPI data opens door to "more rate cuts" next year.

[News Details]

Gaza Ceasefire mediators to meet in U.S. for the second phase negotiation

On December 18th, local time, White House officials announced that U.S. Special Envoy for Middle East Affairs Witkoff will meet in Miami on December 19 with senior officials from Qatar, Egypt, and Turkey, focusing on the second phase of the Gaza ceasefire. Sources say Qatar, Egypt, Turkey, and the U.S. believe both Israel and Hamas are stalling implementation of the second phase of the truce, prompting urgent efforts to draft a joint plan to push both sides to honor commitments.

U.S. November inflation cools but faces skepticism

The U.S. Bureau of Labor Statistics (BLS) reported that headline CPI rose 2.7% year-on-year last month, while core CPI—excluding volatile food and energy prices—was even lower at 2.6%, both below economists' expectations. Ahead of the release, Dow Jones survey economists had forecast headline CPI at 3.1% and core CPI at 3%. The unexpectedly low November CPI breaks the recent trend of persistent inflation strength. Several economists noted that shelter prices, one of the largest components of CPI, were essentially flat over two months, casting doubt on the data's authenticity.

Ashworth, an economist at Capital Economics, pointed out that while the data might reflect a genuine retreat in inflation pressures, such a sudden stall—especially in more persistent service items like rents—is highly unusual, especially outside a recession. He concluded that it may take December's data to determine whether this is a statistical anomaly or true disinflation.

Morgan Stanley economist Gapen said in a report that the surprise drop reflects weakness in goods and services markets, but part of the cause could be methodological issues: BLS may have carried forward past price data for some categories, effectively assuming zero inflation. He believes November's data is too volatile to draw firm conclusions about inflation trends.

ECB officials say rate-cut cycle may have ended

The European Central Bank held rates steady for the fourth consecutive meeting, keeping the deposit facility rate at 2%, and reiterated that inflation will return to its 2% medium-term target. According to sources cited by foreign media, based on the latest growth and inflation outlooks, ECB officials see the rate-cut cycle as very likely over unless another major shock occurs.

An ECB source said that after eight rate cuts starting from a peak of 4%, the deposit rate should remain at 2% barring major shocks.

While interest rate futures markets scaled back bets on ECB cuts and priced in possible hikes as early as next year, the source said any talk of hikes is premature. One policymaker noted that if inflation stays below target for several months, further monetary easing remains possible.

Bank of England cuts rates by 25 bps, pace of easing to slow

The Bank of England cut its policy rate by 0.25 percentage points to 3.75% on Thursday, matching market expectations and marking the lowest level since February 2023. The decision was passed by a 5–4 vote; members Greene, Lombardelli, Mann, and Pill favored holding rates unchanged.

The BoE said future decisions on further monetary easing will become harder, and rates are likely to continue a gradual downward path. Members lowered inflation forecasts and now expect zero GDP growth in Q4, versus the previous forecast of +0.3%.

BoE Governor Bailey switched his vote to support the cut. He noted that rates are on a gradual downward track, and each cut makes the decision harder, but disinflation has become more firmly established, leaving room for easing. Looking ahead, he believes the BoE will stay on a gradually declining path toward a level that can sustain stable inflation—neither overheating nor undercooling. Mathematically, the bank is approaching that equilibrium, so rate decisions will become more finely balanced. He expects the pace of cuts to slow at some point, but cannot specify when due to high uncertainty.

Trump: Next Fed Chair must be "Uber Dovish"

On Wednesday, U.S. President Trump stated clearly in a national address that the next Fed chair must be someone who supports large rate cuts, and promised to announce the key decision soon. Last week, Trump told The Wall Street Journal he prefers former Fed Governor Kevin Warsh or White House economic adviser Kevin Hassett for the role. He also made clear the next Fed chair should consult him on setting interest rates, breaking with the tradition of presidential non-interference in rate decisions.

ECB holds rates steady, raises inflation forecasts

On Thursday, December 18th, the ECB kept its deposit facility rate unchanged at 2%, as expected, marking four consecutive meetings without change. Main refinancing rate and marginal lending rate remained at 2.15% and 2.40%. The latest assessment reaffirmed that inflation is expected to stabilize at the 2% target over the medium term.

Euro-system staff projections show headline inflation averaging 2.1% in 2025, 1.9% in 2026, 1.8% in 2027, and 2.0% in 2028. Core inflation is seen at 2.4% in 2025, 2.2% in 2026, 1.9% in 2027, and 2.0% in 2028. The 2026 inflation forecast was revised upward mainly because staff now expect a slower decline in services inflation than previously thought.

Growth prospects are stronger than September forecasts, driven especially by domestic demand. Growth forecasts were raised to 1.4% in 2025, 1.2% in 2026, 1.4% in 2027, and maintained at 1.4% in 2028.

The Governing Council remains firmly committed to ensuring inflation stabilizes at 2% over the medium term. Monetary policy stance will be decided meeting-by-meeting based on data, assessing inflation outlook and risks, taking into account the latest economic and financial data, developments in underlying inflation, and transmission of monetary policy. The Council will not pre-commit to any specific rate path.

Goolsbee: CPI data opens door to "more rate cuts" next year

Federal Reserve Bank of ‌Chicago President Austan Goolsbee said on ‌Thursday, "there's a lot to like" in the latest consumer price index data, and if it can be sustained, it will help open the door for more interest rate cuts ‍next year. "My view is that the settling point of rates is a fair bit below where it is today, and that by the end ⁠of next year we can, as long as we are hitting our marks on getting inflation back on path to 2%, I think that it's realistic that rates can come down a fair amount," he said.

Goolsbee also explained, "I just am uncomfortable front loading the rate cuts. Before there's strong confidence inflation will be returned to target. Before easing again."

The report, its release delayed by the government shutdown, showed a moderation in price pressures. But economists viewed the report cautiously given issues with its compilation, and the favorable turn was not seen as an all-clear that price pressures.