Asian stocks rebound tracking Wall Street gains, dovish BOJ

Investing.com -- Most Asian stocks rose sharply from recent lows on Friday, tracking an overnight bounce in Wall Street following a series of strong earnings, while a dovish outlook from the Bank of Japan sparked a rally in the Nikkei.

Still, most regional indexes were set to close the week flat or lower, amid persistent concerns over worsening economic growth and rising interest rates.

Japan’s Nikkei 225 index jumped 0.8% after the Bank of Japan held interest rates at record lows and said it will "patiently" continue with its quantitative easing and yield curve control measures.

The move points to accommodative conditions for Japanese stocks, which is likely to facilitate more buying into markets flush with liquidity.

But the bank slightly hiked its inflation outlook for fiscal 2023. Data on Friday also showed inflation in Tokyo, Japan's capital, rose more than expected in April. The reading heralds a similar trend in nationwide inflation, and could signal growing pressure on the BOJ to eventually tighten policy this year - a possibility that new Governor Kazuo Ueda has raised.

Broader Asian markets rose, recovering a measure of their losses this week as technology-heavy bourses were supported by a series of stronger-than-expected earnings from major U.S. tech firms.

Hong Kong’s Hang Seng index added 0.9%, while the Taiwan Weighted index rose 0.8%. Wall Street indexes surged on Thursday, led chiefly by the Nasdaq Composite following stronger-than-expected earnings from Meta Platforms Inc (NASDAQ:META). Earlier this week, peers Microsoft (NASDAQ:MSFT) and Alphabet (NASDAQ:GOOGL) had also logged strong earnings growth.

Indian stocks were the best performers in Asia this week, with the Nifty 50 and BSE Sensex 30 indexes trading at two-month highs after a string of strong local earnings largely offset weak global cues. Both indexes were set to add more than 1.6% this week.

Financials played a key role in the Indian stock rally, following consensus-beating results from Bajaj Finance Ltd (NS:BJFN) and ICICI Bank Ltd (NS:ICBK). Reliance Industries Ltd (NS:RELI), India’s largest company by market capitalization, also logged a 19% jump in its quarterly profit.

China’s Shanghai Shenzhen CSI 300 and Shanghai Composite indexes added about 0.7% each as they extended a recovery from nearly four-month lows hit earlier in the week. Australia's ASX 200 added 0.1%.

But sentiment towards broader Asian markets remained largely cautious, as softer-than-expected U.S. GDP data soured sentiment towards risk-driven assets. Stronger-than-expected inflation and labor market readings also pushed up concerns over more interest rate hikes by the Federal Reserve, ahead of a meeting next week.