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Asia stocks drop with focus on Nvidia, China moves: markets wrap

Asia stocks drop with focus on Nvidia, China moves: markets wrap
An electronic stock board displaying a graph of the Nikkei 225 Stock Average's movements outside a securities firm in Tokyo, Japan, on Thursday, 1 June 2023. (Photo: Kiyoshi Ota/Bloomberg)

Stocks in Asia fell after a tech-led retreat on Wall Street, with Chinese markets showing mixed response to Beijing’s latest measures to restore investor confidence.

A gauge of Hong Kong-listed Chinese firms rose 1.6% after opening lower, while the CSI 300 Index of mainland shares shed 0.2%. China’s two main bourses froze the accounts of a major quantitative hedge fund for three days after the money manager dumped a large amount of shares within a minute on Monday. Meantime, banks also ramped up funding help for the troubled property sector.

An index tracking Asian equities declined as much as 0.5%, snapping a four-day winning streak, dragged by losses in Japan, South Korea and Australia. Shares also dropped in Japan, South Korea and Australia. The region’s weak tone came after the Nasdaq 100 fell almost 1% and the S&P 500 slid below 5,000. 

The focus is also on Nvidia Corp.’s earnings due later on Wednesday. The chip maker sank more than 4% in the run-up to its results later Wednesday, where traders will be looking for confirmation the company can meet the lofty expectations set by the artificial-intelligence boom.

“The company’s results have become the biggest of the reporting period, acting as both a macroeconomic barometer and the proverbial canary in the coal mine for the artificial intelligence boom,” said Kyle Rodda, senior market analyst at Capital.Com Inc., referring to Nvidia. “The bar for an upside surprise is set high,” with its valuation at eye-watering levels, he said. 

The dollar steadied and Treasury 10-year yields were little changed in Asian trading, while persistent bearishness around the outlook for China’s steel demand pushed iron ore to a three-month low.

In Japan, recent loss of momentum has pulled the Nikkei 225 further away from reaching its highest-ever close of 38,915.87 in 1989. Still, macro and stock hedge funds are betting on Japan this year, predicting the central bank will shift its policy after eight years of negative interest rates. The yen steadied around 150 per dollar as the nation’s exports rose more than expected in January.

In commodities, oil steadied as investors juggled signs of tighter supplies with elevated tensions in the Middle East and a still-shaky demand outlook. Elsewhere, gold was little changed after four sessions of gains.

Nvidia nerves

The ongoing earnings season has so far reaffirmed the view that Corporate America is holding up well, although the reporting period has been mixed for the “Magnificent Seven” mega caps. Among other highlights from the US session, Walmart Inc. climbed after reporting strong earnings while Palo Alto Networks Inc. tumbled in late trading after cutting its revenue forecast for the year.

Ahead of Nvidia’s numbers, some traders decided to lock in profits — with the market also weighing a report that Microsoft Corp. is developing a networking card as an alternative to the one supplied by the chipmaker.

The artificial-intelligence frenzy has boosted stocks that have been linked to the technology, and Nvidia is one of the few firms to have demonstrated significant revenue growth from AI.

The Fed’s January meeting minutes are also due on Wednesday, offering traders more clues about where policymakers stand on a rate-cut timeline. Faster-than-expected inflation last week fueled concerns the Fed may not begin cutting interest rates as soon — or by as much — as market participants previously expected this year.

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