Asian stocks rise on rate cut cheer; Japan trims gains after BOJ

Investing.com– Most Asian stocks rose on Friday, tracking overnight gains on Wall Street as investors cheered a bumper interest rate cut from the Federal Reserve.

Japanese stocks outpaced their regional peers, but trimmed early gains after the Bank of Japan held interest rates steady but said it expected inflation to keep increasing. 

Chinese stocks lagged as the People’s Bank of China kept its benchmark lending rate unchanged despite increasing calls for more stimulus. 

Regional markets took a positive lead-in from Wall Street, where the S&P 500 and Dow Jones Industrial Average hit record highs after the Fed cut rates by 50 basis points and kicked off an easing cycle. 

Gains in technology stocks were a key driver of this trade, with buying spilling over into Asian markets. But U.S. stock index futures fell in Asian trade, amid signs that the rate cut rally was now cooling. 

Japanese stocks trim early gains after BOJ 

Japan’s Nikkei 225 was the best performer in Asia for a second straight session, rallying 1.8%, while the broader TOPIX added 1.5%. Both indexes trimmed some early gains after the BOJ decision. 

The BOJ kept interest rates unchanged in a unanimous decision, in line with market expectations. But while the central bank did not provide any overtly hawkish signals, it did flag expectations for a steady increase in consumer price index inflation.

Expectations of higher inflation have been a key driver of the BOJ’s rate hikes- of which it had two this year. The central bank expects inflation to increase on improving private consumption. 

Data released earlier on Friday showed CPI inflation rose to a 10-month high in August, furthering the BOJ’s stance. 

 But the inflation reading also signaled steady improvement in the Japanese economy, especially as private consumption benefited from bumper wage hikes enacted earlier this year. 

Chinese stocks lag as PBOC keeps rates unchanged 

China’s Shanghai Shenzhen CSI 300 and Shanghai Composite indexes fell slightly on Friday, lagging their regional peers as a rebound from seven-month lows petered out. 

Sentiment towards China was further dented by the PBOC keeping its benchmark loan prime rate unchanged, despite increasing calls for more stimulus measures from Beijing. 

The PBOC had unexpectedly cut the LPR in July, moving it further into record-low territory to loosen local monetary conditions. But a raft of recent economic readings showed little improvement in China, as weak consumer spending and rampant deflation remained in play.

Hong Kong’s Hang Seng index, however, outperformed on gains in technology stocks, rising 1.3%.

Gains in tech also aided South Korea’s KOSPI, which rose 0.8%. 

Broader Asian markets cheered the lowering in U.S. interest rates, given that looser monetary conditions free up more liquidity for investing in risk-driven markets.

Australia’s ASX 200 rose 0.3% and hit a record high of 8,246.20 points earlier in the session. 

Futures for India’s Nifty 50 index pointed to a muted open, after the index hit a record high in the prior session.