As Predicted, BoJ Hikes and the Global Stock Rally Cools – Asia Market Wrap

Global stocks struggled for direction as investors paused to assess the durability of the relief rally sparked by the US-Iran agreement to reopen the Strait of Hormuz, while also digesting policy decisions from the BoJ and developments in China.

MSCI’s global equity index fluctuated between gains and losses after advancing more than 1% in each of the previous three sessions. US equity futures edged lower following Monday’s sharp rally, which saw the S&P 500 gain 1.7% and the Nasdaq 100 jump 3.1%. Brent crude slipped below $83 a barrel after posting its largest decline in more than two weeks, extending the unwind of the geopolitical premium that had built up during the conflict.

The BoJ raised its benchmark interest rate by 25 bps to 1%, the highest level since 1995. The Yen surrendered earlier gains against the Dollar despite the move, while Japanese government bond yields rose. The Nikkei 225 rebounded as investors welcomed a decision that broadly matched expectations, helping lift the wider Asian equity benchmark after a subdued start to the session.

Meanwhile, fresh data highlighted ongoing challenges in China. Consumer spending contracted for the first time since the pandemic, while investment activity weakened further, underscoring persistent domestic demand concerns despite strong export performance and easing geopolitical tensions. China’s property sector remained under pressure, with home prices falling at a faster pace in May.

The mixed market reaction suggested investors remain cautious about declaring a sustained risk-on environment, balancing optimism over easing Middle East tensions against signs of slowing growth in the world’s second-largest economy.