Japan's Nikkei surged to a 34-year peak, reaching 38,678 points, just shy of the all-time high in 1989, fueled by an overnight Wall Street rally. The 1.4% rise came as a response to a significant fall in US retail sales, reigniting expectations of an early interest rate cut, subsequently impacting the dollar.
The index is up 4.8% for the week, marking the third consecutive week of gains and a remarkable 15.6% year-to-date increase. Nomura predicts the Nikkei could reach 40,000 points by year-end, citing factors such as the end of deflation in Japan, global investment diversifying from Chinese equities, and improvements in Japanese corporate governance.
Other Asian markets also traded higher, with MSCI's Asia-Pacific shares outside Japan up 0.3%, heading for a 1.4% weekly gain.
US retail sales data revealed a sharper-than-expected decline of 0.8% in January, the most significant drop in 10 months, fueling expectations of potential rate cuts by the US Federal Reserve in June. This optimism boosted Wall Street, with the S&P 500, Nasdaq Composite, and Dow Jones Industrial Average posting gains.
The anticipation of a rate cut impacted the US dollar, losing 0.4% against its peers, settling at 104.36. The yen strengthened to 149.9 per dollar, moving away from the critical 150 level that might trigger Japanese intervention.
The yield on the US 10-year Treasury notes remained relatively unchanged at 4.2496%, up 6 basis points for the week. Meanwhile, the yield on two-year Treasury notes edged 2 basis points higher to 4.5930%, marking a 10 basis points increase for the week.