SK Hynix, Samsung climb as Asian stocks, bonds gain; oil extends decline

Asian equities and bonds edged higher as oil prices fell, easing inflation concerns. The yen remained relatively stable ahead of the Bank of Japan's interest rate decision, with traders anticipating a hike. MSCI's regional equities gauge rose 0.5%, though gains were limited, with more shares declining than gaining. S&P 500 futures were essentially unchanged, Hang Seng futures increased by 0.4%, Japan's Topix fell 0.4%, and Australia's S&P/ASX 200 rose 0.1%.

Chip manufacturers SK Hynix and Samsung Electronics gained after a key US semiconductor index soared. Brent crude dropped for a third consecutive day, falling 0.8% to around US$104.00 a barrel as supply worries eased and investors shifted focus to the upcoming US-Iran war discussions. Treasuries maintained their gains from the previous trading session, with the 10-year yield falling by nine basis points to 4.93% following the Fed's rate hike.

Government bonds in Australia, Japan, and New Zealand opened higher. Lower energy prices might lessen pressure on consumer prices, giving central banks more time to evaluate the effects of tighter monetary policy and bolster both stocks and bonds. However, the stability of this respite could hinge on whether oil prices continue to decline, as the US-Iran conflict and potential further diplomacy over the issue leave the outlook for energy supplies uncertain.

Analyst Nick Twidale noted that central bank policy remains a significant driver of markets, and geopolitical risks persist. Markets faced another challenge with the "triple witching" - when contracts tied to stocks, index options, and futures expire. Over US$2 trillion in notional value of options ends on Friday, and historical data indicates the S&P 500 has a higher-than-average chance of closing lower on these days.

Gold continued its upward trend after a 2% increase on Thursday, while the US dollar gauge steadied. UK government bonds also rose after the Bank of England (BOE) abandoned plans to sell long-dated gilts as part of its quantitative-tightening program. The BOE maintained its benchmark rate at 1% on Thursday. Japan's inflation slowed for the first time in four months, largely due to government subsidies.

Most respondents in a Bloomberg survey expect the BOJ to raise its policy rate to 1.25% from 1% on Friday, with Governor Kazuo Ueda set to speak after. The yen traded around 156.20 to the US dollar. If the BOJ indeed raises rates, it would be well signaled and already priced in, says Amova Asset Management's Naomi Fink. However, a failure to raise rates could present an unexpected shock.