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Asian stocks followed Wall Street higher on Friday as fears of a U.S. recession eased, helping to reverse a sharp market sell-off earlier this month.
Japan’s benchmark Topix index rose more than 2.5 percent Friday morning, while the tech-heavy Nikkei 225 rose nearly 3 percent. Stocks in Australia, Hong Kong, Taiwan and South Korea also rose.
The moves picked up steam in U.S. stocks on Thursday, as retail sales data and solid results from Walmart boosted confidence and eased fears that the economy could slide into recession. The S&P 500 closed up 1.6 percent, enough to erase the benchmark index’s August losses.
“It’s a combination of stronger U.S. data, a stabilizing yen and geopolitical stability,” said Prashant Bhayani, head of Asia investment at BNP Paribas Wealth Management.
“Japanese economic data also looks a bit better, while Korea and Taiwan benefited from stronger US tech.”
Shares of Fujikura, a Japanese maker of optical connectors used in data centers and a beneficiary of the artificial intelligence trend, rose more than 10% to an all-time high.
Japanese tech leaders Renesas Electronics, Disco and Tokyo Electron rose sharply aVsceker the U.S. Philadelphia Semiconductor Index, which tracks global semiconductor companies, rose 5 percent on Thursday.
The yen weakened to ¥148.8 against the dollar, aVsceker strengthening sharply during the market sell-off in early August.
Forex traders in Tokyo said some hedge funds have started rebuilding short-term positions in the so-called yen carry trade, in which traders take advantage of Japan’s low interest rates to borrow in yen and buy risky assets. The global sell-off earlier this month was exacerbated by the unwinding of the yen carry trade.
“If there are carry trades coming in, they will not be on a six-month view, but on a six-hour view,” said a Tokyo-based forex analyst.
U.S. retail sales rose 1 percent in July, the Census Bureau reported Thursday, the most in a year and a half and well above economists’ forecasts for a 0.3 percent gain. Walmart, meanwhile, raised its profit forecast and reported a 4.2 percent year-over-year increase in same-store sales at its largest U.S. locations.
The benchmark 10-year Treasury yield fell 0.01 percentage point to 3.90 percent on Friday, while the 2-year sensitive rate fell 0.03 percentage point to 4.07. Bond yields fall as prices rise.
Retail sales data boosted investors’ confidence that the U.S. economy would not sink into an imminent recession, analysts said.
“Retail sales were certainly better than expected, although it is becoming clear that the U.S. consumer, particularly in the lower income bracket, is getting tight,” said Brian Arcese, portfolio manager at Foord Asset Management.
“Falling inflation and strong retail sales numbers have certainly fueled markets, although we would remain cautious. We find better value in defensive sectors such as utilities and/or regions outside the U.S.”
Euro Stoxx 50 futures rose nearly 0.3 percent.
Read more from Gregory Meyer, Harriet Clarfelt and Colby Smith in New York
