Asian equities mixed; Aussie dollar slumps on CPI: markets wrap
Asian stocks were mixed on Wednesday after a rally on Wall Street that was fuelled by strength in US consumer confidence and home sales. The Australian dollar slumped on soft inflation data and the yen strengthened after verbal intervention in Tokyo.
The Aussie fell as much as 1% and the nation’s stock market jumped 1.4% after inflation eased more than expected in May, improving the prospects for the central bank to pause in its rate-hike campaign.
Stocks also advanced in Japan, but fell in Hong Kong and mainland China. US stock futures declined following a late-breaking Wall Street Journal report that the Biden administration was considering new curbs on exports of artificial intelligence chips to China, setting off a retreat in post market trading for some US tech stocks.
“The report of the US considering more restrictions on chip exports to China may have hurt sentiment,” said Vey-Sern Ling, managing director at Union Bancaire Privee in Singapore.
Tech mega caps had earlier led the rebound in US equities. Tesla rallied after a 6% plunge, Snowflake jumped on an artificial intelligence-related partnership with Nvidia Corp. and Facebook’s parent Meta Platforms Inc. gained as Citigroup Inc. lifted its target. Alphabet Inc. underperformed with an analyst saying Google’s owner was moving “too fast” in AI.
Yet the data showing economic resilience also underscored the likelihood that the Federal Reserve has further to go in tightening monetary policy. Treasuries held losses Wednesday after yields went higher on Tuesday at the same time as the Nasdaq 100 jumped almost 2%.
The offshore yuan fell slightly after the People’s Bank of China set its daily reference rate for the managed currency in line with estimates. The yen strengthened away from the closely-watched 145 level versus the dollar after Japan’s top currency official said authorities will respond should there be excessive foreign exchange moves.
Later on Wednesday, the focus will turn back to a gathering in Portugal and a panel discussion featuring the chiefs of the Fed, the European Central Bank, the Bank of Japan and the Bank of England.
For the first time since early 2022, the US consumer confidence report showed that a larger percentage of people expected higher stock prices relative to lower equity values, according to Bespoke Investment Group. Meanwhile, new-home sales advanced to the fastest pace in over a year.
“Stocks are bouncing back after some strong US economic data gave a boost to consumer discretionary stocks and as investors piled back into AI trades,” said Edward Moya, senior market analyst at Oanda. “The strong consumer confidence report will likely suggest expectations are not for the labor market to deteriorate quickly, which should confirm expectations that a recession will not happen this year, but most likely next.”
In the run-up to the results of the Fed’s stress test, a nearly $3-billion exchange-traded fund tracking regional lenders was up over 1.5%. Analysts largely expect banks to sail through the tests even as regulators explore more stringent requirements in the aftermath of a few collapses in the financial industry.
Elsewhere oil edged higher as investors weighed the outlook for monetary policy and a mixed industry report on US crude stockpiles. Gold was little changed. DM