Asia shares extend gains, yen friendless as bonds buckle

By Wayne Cole

SYDNEY, Dec 22 (Reuters) - Asian shares rose broadly on Monday tracking tech-driven gains on Wall Street, while the yen floundered near all-time lows against the euro and Swiss franc as higher interest rates piled pressure on Japanese government debt.

Despite it being a holiday-shortened week for much of the world, momentum funds were still flowing to equities, precious metals and commodities ahead of delayed data that is forecast to show the U.S. economy had continued to grow strongly in the third quarter.

Median forecasts tip annualised growth of 3.2%, due in part to a sharp pullback in imports after a run-up earlier in the year ahead of the introduction of tariffs.

Yet analysts at BofA had some words of caution, noting their measure of investor sentiment had moved into extreme bullish territory at 8.5, often a prelude to a reversal.

"Readings above 8.0 have often preceded pullbacks, with global equities declining a median 2.7% over the following two months, with a 63% hit rate," they wrote in a note.

"Sentiment data reinforce the cautionary signal: the Fund Manager Survey shows most bullish sentiment in 3-1/2 years, driven by expectations of rate, tariff, and tax cuts."

For now the fear of missing out seemed to be greater and S&P 500 futures added another 0.3%, with Nasdaq futures up 0.5%.  

Japan's Nikkei climbed 1.9%, extending Friday's bounce as a steep decline in the yen promised to boost export earnings for Japanese corporates.

The yen selloff came as the Bank of Japan raised rates to a 30-year high of 0.75% and flagged more to come, slamming government debt. Yields on 10-year bonds surged a further 8 basis points to 2.10%, levels not seen since 1999.

Minutes of the BOJ meeting are due on Wednesday, while the head of the central bank speaks to a Japanese business lobby on Christmas Day.

ON INTERVENTION WATCH

The yen touched a fresh record trough on the euro at 184.90, and on the Swiss franc at 198.08. The dollar paused at 157.29, with investors wary of testing the November peak of 157.90 in case that triggered intervention from Tokyo.

Japanese officials duly signalled their concern about one-way moves and warned of appropriate action against an excessive decline.

A break of 158.00 higher would target the 2025 top of 158.88, and then the 2024 high at 161.96. The dollar was otherwise steady on a basket of currencies at 98.725, having gained 0.3% on Friday.

MSCI's broadest index of Asia-Pacific shares outside Japan added 0.8%, while South Korea jumped 1.7% on optimism over AI-related earnings.

Chinese blue chips gained 0.8%, while Singapore's main index climbed 1% to a record top.

European equities were quieter, with EUROSTOXX 50 futures and FTSE futures off 0.1%, while DAX futures were little changed.

Analysts at TD Securities noted equity markets recorded their highest weekly inflows on record at $98 billion last week, led by U.S. equity funds. Chinese equity funds saw their third largest weekly inflow of 2025, and emerging markets drew their largest inflows since April.

Flows to bonds, however, saw their fourth straight week of slowdown. U.S. 10-year yields were last up 2 basis point at 4.169%.

Silver was again the star in commodities, reaching a fresh record at $69.44 per ounce and bringing gains for the year to almost 140%. Gold gained 1.3% on the day to $4,394 an ounce. [GOL/]

   Oil prices rose after the U.S. intercepted a Venezuelan oil tanker over the weekend, and was pursuing another one in what would be the third such operation in less than two weeks. [O/R]

Brent firmed 0.8% to $60.96 a barrel, while U.S. crude rose 0.8% to $56.99 per barrel.

(Reporting by Wayne Cole; Editing by Stephen Coates)