Business Maverick

Business Maverick

Asia stocks set to fall as Meta drags on big tech: markets wrap

Asia stocks set to fall as Meta drags on big tech: markets wrap
Signage outside Meta headquarters in Menlo Park, California, US, on Thursday, 1 February 2024. (Photo: David Paul Morris/Bloomberg)

Asian equity markets dropped after Meta Platforms’s disappointing outlook raised concern on whether the industry that has powered the bull market in equities has run too far.

Equity benchmarks slid in Hong Kong, Japan and mainland China, while contracts for US stocks also pointed to declines. Australian financial markets are shut for a holiday. The yen extended declines after weakening beyond 155 per dollar for the first time in more than three decades on Wednesday, heightening the chances of intervention ahead of the Bank of Japan’s decision meeting on Friday.

A $250-billion exchange-traded fund tracking the Nasdaq 100 got hit after the close of regular US trading as the Facebook parent tumbled more than 15%. Meta projected second-quarter sales that were below analyst expectations and increased its spending estimates for the year.

“Meta’s not-so-upbeat outlook sent markets running for cover after-hours, which also imminently has caution spilling over for Asia markets that are already hobbled by a ‘higher for longer’ Federal Reserve and China jitters,” said Vishnu Varathan, chief economist for Asia ex-Japan at Mizuho Bank in Singapore.

In Japan, the yen depreciated to as low as 155.42 per dollar on Thursday, a new 34-year low versus the dollar. Traders will be alert for any comments from officials that suggest a higher state of readiness for intervention ahead of the Bank of Japan’s policy decision

The BOJ is forecast to keep its interest rate settings unchanged on Friday, while the currency’s plunge makes it more likely the bank will tone down its stance on keeping policy easy.

Japan’s weak currency is a “big problem”, Japan Airlines co-CEO Mitsuko Tottori said in a group interview, adding that a stronger rate than the current level of around ¥155 to the dollar would be better. 

In the corporate world, shares of South Korea’s SK Hynix plunged even after the company said it expects a full recovery in the memory market after AI demand spurred the chipmaker to log its fastest pace of revenue expansion since at least 2010.

SK Hynix’s stock was sold “on the news after its big gain on Wednesday and Meta’s 15% fall is also denting the investor sentiment,” said Marcello Seongsoo Ahn, a portfolio manager at Quad Investment Management in Seoul.

BHP Group has approached Anglo American Plc about buying the 107-year-old company in a move that offers to spark the biggest shakeup of the global mining industry in over a decade. 

Elsewhere, oil held a modest decline, with a risk-off tone in broader markets countering a drawdown in US stockpiles. Gold was little changed. 

Treasuries opened little changed in Asia after yields rose on Wednesday.

Earnings unfolding

Meta reported revenue of $36.5-billion in the first quarter, an increase of more than 27% over the same period a year ago. It was a small beat, as analysts were looking for revenue of $36.1-billion on average, according to estimates compiled by Bloomberg. Profit more than doubled to $12.4-billion.

For weeks, traders have been scaling back how many rate cuts they expect from the Fed amid a string of resilient economic data. Economists surveyed by Bloomberg predict gross domestic product likely cooled to around 2.5% in the first quarter, with the figures still potentially suggesting persistent inflationary pressures.

The “GDP report comes as market participants hope for a soft number that would lead to rate cuts sooner rather than later,” said Jose Torres at Interactive Brokers. “We expect a stronger-than-projected figure. It would be great for revenue growth prospects, but bad for the timing and extent of rate cuts.”


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