Markets Briefing: Yen and JGBs rally on GPIF repatriation hopes
Asian equities climbed on the final trading day of the week as investors returned to technology, brushing aside a fresh flare-up in Middle East tensions. South Korea's Kospi jumped more than 4 per cent to lead the region, with SK Hynix among the winners after a heavily oversubscribed American depositary share sale ahead of its Nasdaq listing (BBG). Hong Kong's Hang Seng headed for its best week in more than a year, and the Nikkei rose, while US and European equity futures edged lower before the coming earnings season. European volatility tumbled as the week's risk-off premium unwound.
The rally rested on renewed faith in the AI investment cycle. Micron lifted planned US plant spending to help meet AI demand, Meta introduced a paid tier for its most advanced model, and S&P Global Ratings cut Oracle to the lowest investment-grade rung on rising AI outlays (BBG).
In geopolitics, a US official said technical talks with Iran are continuing despite two days of strikes, and separately, Ukraine's long-range drones were reported to be reaching Siberia and imperilling Russian energy assets (BBG) (WSJ).
Central banks stayed on a tightening tilt. The account of the ECB's June meeting kept a September hike in view, showing the Governing Council expected the energy shock to hold inflation above target into the first half of 2027 while retaining a data-dependent, meeting-by-meeting stance with no pre-commitment (WSJ). In the United States, New York Fed President Williams said AI-driven demand is now his main inflation concern and could force rate rises if it persists, echoing the June minutes in which a few officials saw a case for a hike (BBG). Chair Warsh named leaders for five task forces to review Fed communications, the balance sheet and its inflation models (BBG). Peru held its key rate as an inflation spike was seen fading (BBG).
The dollar slipped, heading for a second weekly decline. The yen led the gains, firming towards 161.6 per dollar after Finance Minister Katayama urged pension funds, including the roughly 300-trillion-yen Government Pension Investment Fund, to invest more at home, though strategists were split on whether the move can last given the unchanged macro backdrop (BBG).
Source: https://www.gpif.go.jp/en/performance/73509681gpif/gpifannual_report_summary_2025_en.pdf
The People's Bank of China set its yuan fixing stronger than 6.8 per dollar for the first time since 2023 (BBG). South Korea's deputy finance minister called the won misaligned with fundamentals and signalled room to steady the market (Marketscreener).
Commodities were mixed. Crude steadied, with West Texas Intermediate near 72 dollars, as traders judged the US-Iran conflict unlikely to broaden into a supply disruption (BBG). Gold eased as the safe-haven bid faded. Iron ore headed for its biggest weekly gain since early May on a looming strike at BHP's Port Hedland terminal and an unresolved dispute between China and Fortescue, even as Chinese steel margins stayed soft (BBG). Copper rose as risk assets shrugged off the strikes.
In rates, Treasuries rose for a second day, the 10-year yield slipping to about 4.54 per cent (BBG). Japan's longer-dated government bonds rallied hard, the 10-year yield down sharply, after Katayama's reallocation comments raised hopes of fresh domestic demand for the curve (BBG). Euro-area and Australian yields eased in sympathy. Bitcoin firmed more than 1 per cent, riding the broader risk-on tone.
The overnight data calendar was light, with New Zealand closed for a bank holiday. Japan's producer prices rose 7.1 per cent year on year in June, the fastest pace since early 2023 and above the 6.8 per cent consensus, up from 6.6 per cent, keeping upstream cost pressure in the pipeline and supporting the case for further Bank of Japan normalisation.
The main event is this afternoon's Canadian labour force survey, a key read on how quickly hiring is cooling. ECB Vice President Vujčić is also due to speak, the first Governing Council voice since the June account. You can find the full Macro Roadmap here.
Time Stamp: 07:38 CET