Stocks in Asia traded mixed at the open on Wednesday as investors await the Federal Reserve’s rate decision. Currencies also held to narrow ranges in early trading.
Equities in Japan fell at the open, with the Topix index ending its three-day winning streak. South Korean stocks fluctuated and Australian shares were slightly higher, where traders will be watching inflation data later Wednesday for further clues on the central bank’s monetary policy path.
Positive news came from SK Hynix Inc., the supplier of memory chips to Apple Inc., with its better-than-expected revenue, an important signal of a recovery in the memory chips market. Its shares rose, ending the losses seen in previous five sessions.
Asian electric-vehicle makers and the related supply chain may gain Wednesday after Chinese battery maker Contemporary Amperex Technology Co. Ltd.’s quarterly profit soared, powered by rising electric-vehicle sales globally and stabilizing prices of key materials like lithium.
Futures for Hong Kong equities showed a small decline and those for US stocks also slipped. The S&P 500 closed Tuesday at its highest since April 2022, the Nasdaq 100 outperformed and the Dow Jones Industrial Average saw its 12th straight advance — the longest winning run in over six years — as the Conference Board’s US consumer confidence index climbed to a two-year high. Big tech led equity gains, with traders counting on the earnings season to see whether the enthusiasm around artificial intelligence will justify this year’s market advance.
The yen was steady just below 141 to the dollar while the Australian currency inched slightly lower after leading gains against the greenback in the previous session.
While Chinese assets rallied following the Politburo meeting Monday, investors continue to wait for Beijing to deliver more tangible support for economy amid concern that debt and demographics constraints will weigh on growth.
In a reminder of the opaqueness of government actions, China removed its foreign minister following just seven months in the job after he disappeared from public view in June. Meanwhile, it named Pan Gongsheng as central bank governor.
In the approach to the Fed’s decision, strong consumer confidence data bolstered the soft-landing narrative for the US economy — while suggesting policymakers aren’t done with their inflation fight yet. Rates on swap contracts continued to price in a quarter percentage-point Fed hike later on Wednesday, with an additional 12.5 basis point increase factored in by year-end. That indicates a 50% likelihood of another quarter-point move.
Existing economic data still make the Fed officials “a little nervous” although the numbers are showing things are going in the right direction, according to Ann Miletti, head of active equity at Allspring Global Investments. “They still fear that if they release the pressure too early, things could go back in the opposite direction,” she said on Bloomberg Radio. “I just don’t think they’re willing to take that risk.”
Treasury two-year yields, which are more sensitive to imminent Fed moves, and the dollar steadied.
Earnings Tests
In late trading in the US, a $210 billion exchange-traded fund tracking the Nasdaq 100 (QQQ) climbed as Google’s parent Alphabet Inc. reported revenue that beat analysts’ expectations. Microsoft Corp. posted tepid sales growth, while Texas Instruments Inc. gave a lukewarm forecast.
There are so many bulls in the US stock market that any disappointment on the economy or earnings poses a risk to the rally, according to Citigroup Inc. strategists. Investor exposure to the S&P 500 remains extended and one-sided, even after bullish momentum has waned in recent weeks, a team including Chris Montagu said.
Given that Wall Street had set a low bar coming into the reporting season, roughly 80% of the companies have thus far beaten profit estimates, according to data compiled by Bloomberg.
Meanwhile in commodities, oil slipped slightly Wednesday after recent gains amid tighter supplies and optimism that China’s government will boost the country’s economy.
Key events this week:
- US new home sales, Wednesday
- FOMC rate decision, Fed Chair Powell news conference, Wednesday
- China industrial profits, Thursday
- ECB rate decision, Thursday
- US GDP, durable goods orders, initial jobless claims, wholesale inventories, Thursday
- Japan Tokyo CPI, Friday
- BOJ rate decision, Friday
- Eurozone economic confidence, consumer confidence, Friday
- US consumer income, employment cost index, University of Michigan consumer sentiment, Friday
Some of the main moves in markets:
Stocks
- S&P 500 futures fell 0.1% as of 9:28 a.m. Tokyo time. The S&P 500 rose 0.3%
- Nasdaq 100 futures fell 0.2%. The Nasdaq 100 rose 0.7%
- Japan’s Topix fell 0.5%
- Australia’s S&P/ASX 200 rose 0.2%
Currencies
- The Bloomberg Dollar Spot Index was little changed
- The euro was little changed at $1.1045
- The Japanese yen was little changed at 140.98 per dollar
- The offshore yuan fell 0.1% to 7.1467 per dollar
- The Australian dollar fell 0.1% to $0.6783
Cryptocurrencies
- Bitcoin fell 0.2% to $29,166.36
- Ether fell 0.3% to $1,856.64
Bonds
- The yield on 10-year Treasuries advanced one basis point to 3.90%
- Japan’s 10-year yield was unchanged at 0.460%
- Australia’s 10-year yield advanced four basis points to 4.06%
Commodities
- West Texas Intermediate crude fell 0.4% to $79.35 a barrel
- Spot gold was little changed
This story was produced with the assistance of Bloomberg Automation.
