DSEEY Daiwa Securities Group Inc Japan (PK)

Japan's Nikkei Stock Average was a bright spot in Asia on Friday morning, with other markets downbeat as a weaker yen and gains in global bond yields lifted Japanese financials.

The Nikkei was trading up 0.5%, while Korea's Kospi was down 0.2% and Australia's S&P/ASX 200 was down 0.4%.

The U.S. dollar breached the 105 yen level and was last trading at ¥ 105 as investors remained optimistic that U.S. interest rates will rise this year.

Better results from Deutsche Bank and solid post-Brexit U.K. growth helped optimism, fueling selling of global government bonds. That spilled into U.S. Treasury bonds Thursday, with the U.S. 10-year yield hitting its highest in nearly five months.

"Yen selling is inevitable," said Daiwa Securities senior FX strategist Yukio Ishizuki. Money will flow into global government bonds as yields rise, while Japan government bond yields are capped by policy, he said.

Japan released a batch of economic data at the start of Asian trading Friday. The core consumer price index slipped 0.5% from a year earlier in September, according to data from the Ministry of Internal Affairs and Communications.

"The CPI was weak," said Takuji Aida, chief Japan economist at Socié té Gé né rale. But there will be demand recovery next year as incomes rise amid a tight Japanese labor market, he said.

Financials led the Nikkei as rising Japanese government bond yields are expected to buoy returns, with yields on the 10-year bond up 0.015 percentage point.

Mitsubishi UFJ Financial Group was up 1.6% and Dai-ichi Life gained 3.1%.

Oil prices were nearly unchanged in early Asia trade, despite reports that members of the Organization of the Petroleum Exporting Countries told their Russian counterparts that the group would be willing to cut production by as much as 4% from peak output. The comments were made ahead of a meeting between Russia and OPEC delegates this weekend.

"We have a month to run before the much talked-about OPEC production cap details are completed along with supporting roles of Russia and perhaps Mexico," said Stuart Ive, client manager at OM Financial. "Even with Iraq asking for exemptions … and frosty relations between Saudi and Iran, money is a great healer and opener of doors."

The Hang Seng Index was down 0.1% as traders continue to process Thursday's data showing China's industrial profit growth slowed sharply in September to 7.7% from a year earlier.

"Confidence will still be shaken," said Alex Wijaya, market analyst at CMC Markets. The industrial data "raised the worries" about China's recovery.

Traders will stay focused on U.S. economic growth data due later in the global day.

Hiroyuki Kachi, Takashi Nakamichi, Ese Erheriene, Jenny Hsu, Chelsey Dulaney, Kosaku Narioka contributed to this article.

Write to Willa Plank at willa.plank@wsj.com

(END) Dow Jones Newswires

October 27, 2016 23:45 ET (03:45 GMT)

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