Wall Street's rally steadies Asia as BoJ hike underwhelms

Summary

Wall Street closed higher on relief that the Fed is getting serious about inflation, giving Asian shares a steady lead. The yen slipped after the Bank of Japan raised rates but sounded less hawkish than its peers, with two dovish dissents. The Bank of England held rates while sounding an inflation alarm, and the RBA's Michele Bullock warned upside price risks were materialising. Crude held just above $100 as Saudi–Houthi strikes spread.

Equities

The FTSE 100 closed 1.2% higher at 10,816.14 on Thursday, reaching its highest level in more than a week after the Bank of England kept interest rates at 3.75%. The FTSE 250 also gained 1.2%, closing at 24,352.14.

UK banks rose after the Bank of England paused government bond sales for six months and stopped sales of long-dated gilts entirely. HSBC closed 2% higher on Thursday and Standard Chartered gained 2.2%, while the wider banking sector rose 1.6%. The 30-year gilt yield fell 11.8 basis points to 5.7414%, its lowest level in more than two weeks.

AstraZeneca shares rose around 2.4% on Thursday after the pharmaceutical group announced an investment of nearly 200 million yuan, or $29.81 million, to upgrade its production and supply facilities in Wuxi, China. Bytes Technology jumped 12% after reporting stronger-than-expected first-half results and raising its full-year gross profit growth forecast.

In the US, Wall Street closed sharply higher on Thursday. The Dow Jones Industrial Average rose 0.62% to 51,779.85, the S&P 500 gained 1.14% to 7,637.74 and the Nasdaq Composite jumped 1.69% to 26,418.30, with technology shares leading the advance.

Crypto-linked stocks climbed after the US Securities and Exchange Commission introduced a five-year exemption for tokenised stock trading. Circle Internet Group and Coinbase each closed 5.8% higher on Thursday, while Robinhood gained 5.2%.

CoreWeave fell 4.2% on Thursday after announcing plans to raise capital through stock and convertible bond offerings. Fluence Energy recorded the largest company decline, tumbling 15.4% after cutting its revenue forecast for the 2026 financial year.

US homebuilders gained 1.1% on Thursday after August data showed increases in single-family housing starts and pending home sales. Banks recovered slightly from Wednesday’s 2.3% sell-off, with the sector closing 0.2% higher.

Forex & Commodities

The US dollar edged lower early on Friday, with the dollar index down at 100.2. The yen weakened sharply despite the Bank of Japan raising interest rates by 25 basis points to their highest level in more than three decades, falling to 157.1 per dollar and 180.3 against the euro.

Sterling edged higher early on Friday to $1.337 after the Bank of England held interest rates unchanged on Thursday and unexpectedly paused government bond sales for six months. The euro also strengthened to $1.149, while the Australian dollar rose to $0.7133 and the New Zealand dollar edged up to $0.5739.

The Bank of Japan voted 7-2 for its rate increase, with two policymakers preferring to leave rates unchanged. Japan’s core inflation held steady near the central bank’s 2% target in August, while attention turned to Governor Kazuo Ueda’s comments on the prospects for further policy tightening.

In the US, expectations for another Federal Reserve increase strengthened after the central bank raised rates on Wednesday to a 3.75%-4.00% range. Markets were pricing a 53% probability of a quarter-point increase next month early on Friday, up from 27.2% a week earlier.

Spot gold rose 2.3% on Thursday to $4,360 per ounce, rebounding from a near six-week low as the US dollar and Treasury yields eased. The move followed Wednesday’s Federal Reserve rate increase, with policymakers signalling that further increases could follow.

Oil prices fell for a third consecutive session early on Friday. Brent declined 0.75% to $104.0 a barrel, while US West Texas Intermediate fell 0.69% to $101.2, after both benchmarks closed around 1% lower on Thursday.

Prices eased as concerns over Saudi supply disruptions moderated, following reports that the country was working to restore part of its damaged East-West pipeline capacity and offering additional crude cargoes to Asian refiners. Brent remained on course for its first weekly decline in three weeks, while oil prices stayed above $100 amid continued uncertainty over physical supplies and shipping through the Strait of Hormuz.