Key Takeaways
- RBA Governor Michele Bullock signals a potential interest rate hike at the September 28-29 meeting, noting that upside inflation risks are now materializing.
- The Nikkei 225 (^N225) surged 1% in Tokyo trading, led by a 5% gain in SoftBank Group (9984) shares following reports of a massive $16 billion loan to fuel its AI expansion.
- US Secretary of State Marco Rubio and Chinese Foreign Minister Wang Yi held a critical phone call to finalize details for President Xi Jinping's upcoming visit to Washington.
- New Zealand's Foreign Ministry officially denied any discussions regarding "associate membership" with the European Union, following reports that the status was offered to Canada.
RBA Weighs Further Tightening Amid Stubborn Inflation
Reserve Bank of Australia (RBA) Governor Michele Bullock informed a parliamentary committee on Friday that the central bank must determine if current interest rates are sufficient to cool prices. Bullock emphasized that upside risks to inflation, originally flagged in August, appear to be materializing as firms continue to pass on higher input costs to consumers.
Market participants have reacted by pricing in a 70-75% probability of a rate hike at the RBA's upcoming meeting on September 28-29. The Australian Dollar (AUD/USD) firmed to 0.7113 following the hawkish remarks, as the Governor reiterated that bringing inflation back to the 2-3% target range remains the bank's "crucial objective."
Japan Markets Rise Ahead of BoJ Policy Shift
In Tokyo, the Nikkei 225 (^N225) climbed 1% to reach 64,136.25, buoyed by a weaker yen and positive sentiment following the US Federal Reserve's recent rate decision. SoftBank Group (9984) was a primary driver of the index, with shares jumping 5% on news that CEO Masayoshi Son is securing billions in new funding to bolster the company's position in the global AI race.
Meanwhile, the Japan 2-Year JGB yield fell 1 basis point to 1.85% in early Friday trading. This slight retreat comes as investors brace for the Bank of Japan (BoJ) policy decision, with expectations mounting that the central bank may lift its policy rate to a three-decade high to combat persistent inflationary pressures.
Diplomatic Maneuvers: US-China and NZ-EU Relations
On the geopolitical front, Chinese Foreign Minister Wang Yi urged "stronger communication and cooperation" during a phone call with US Secretary of State Marco Rubio. The call served as a final diplomatic bridge ahead of President Xi Jinping’s state visit to the US next week, where he is expected to meet with President Donald Trump to discuss trade, AI, and regional security.
Separately, the New Zealand Foreign Ministry issued a firm denial regarding rumors of the country seeking "associate membership" with the European Union. The statement followed a proposal by EU Commission President Ursula von der Leyen to grant such a status to Canada as a means of diversifying trade alliances. New Zealand officials clarified that while they value their $1.8 billion trade deal with the bloc, no formal discussions for membership status have occurred.
Ed Liston is a senior contributing editor at TheStockMarketWatch.com. An active market watcher and investor, Ed guides an independent team of experienced analysts and writes for multiple stock trader publications.