Business Maverick

Business Maverick

Japan leads Asian stocks higher, China PMI holds: markets wrap

Japan leads Asian stocks higher, China PMI holds: markets wrap
Pedestrians on the Bund across from commercial buildings in Pudong's Lujiazui Financial District in Shanghai, China, on Monday, April 15, 2024. (Photo: Raul Ariano/Bloomberg)

Asian stocks advanced on Tuesday, with the latest data from China underscoring the recovery in the world’s second-biggest economy. Japanese equities climbed as the market reopened after a volatile yen session. 

Gauges in Hong Kong rose as China’s factories index posted its second straight month of expansion. Futures contracts for US shares were little changed after Wall Street was bolstered by a strong start to the earnings season led by big-tech companies, despite bets the Federal Reserve will keep interest rates higher for longer. 

Japanese stocks gained following a holiday, as the yen surged back from its weakest level against the dollar in 34 years, amid suspicion the government intervened to support the currency. Shares were also boosted by rebounding factory output in a sign of improvement in the manufacturing sector.

“While investors remain cautious about the extent of currency intervention, there seems to be a sense of relief as the uncertainty around yen depreciation has receded,” said Rina Oshimo, a senior strategist at Okasan Securities Co. 

The yen swung wildly, rallying more than 2% on Monday after earlier dropping as much as 1.2% to 160.17 per dollar. That’s the widest trading range since late 2022. It trimmed some gains in early Asian trading as a Bloomberg gauge of the dollar strengthened slightly. 

Elsewhere in Asia, some traders are also looking at the possibility China will need to take an extreme and highly controversial measure to support its moribund economy — devalue the yuan in a big-bang move. Markets in the Asian powerhouse will close on Wednesday until next week for the Labour Day holidays. 

In corporates, Samsung Electronics’s earnings surged after the semiconductor business turned profitable for the first time since 2022, reflecting the global AI development boom. Japanese trading house Sumitomo shares jumped by the most since August 2020 after activist investor Elliott Management Corp. was said to have built a “large” stake in the Japanese trading house.

Elsewhere, Tesla soared 15% after receiving in-principle approval from Chinese officials to deploy its driver-assistance system in the world’s biggest car market. Apple Inc. rallied on a bullish analyst call. Boeing Co. raised $10-billion from a bond sale that attracted about $77-billion of orders.

Beating expectations

Early results from the US reporting season suggest that more than 80% of companies are beating expectations. First-quarter earnings are now on track to increase by 4.7% from a year ago, compared with the pre-season estimate of 3.8%, according to data compiled by Bloomberg Intelligence. 

US 10-year yields steadied Tuesday after falling five basis points in the previous session. The Treasury ramped up its estimate for federal borrowing for the current quarter to $243 billion, more than most dealers had anticipated. Australia and New Zealand bond yields declined early on Tuesday.

US markets could remain volatile this week, but UBS continues to see the current environment as supportive for US equities — driven by solid earnings growth, a potential Fed pivot later this year, and accelerating artificial-intelligence investment.

“We remain constructive on US equities, and expect AI-related companies to drive strong earnings growth in the years ahead,” said Solita Marcelli, chief investment officer Americas at UBS Global Wealth Management. “It is key for investors to hold a healthy strategic allocation to tech stocks, but also advocate diversified exposure across regions and sectors.”

Despite concern that the Fed will be in no rush to cut rates, the appetite for technology stocks last week wasn’t lost on hedge funds. Tech saw the largest net buying since December 2022 by the group, driven by an increase in long positions and short-covering, data compiled by Goldman Sachs’s prime brokerage show. 

The dominance of the “Magnificent Seven” may soon give way to a broadening of earnings growth that is supportive of a variety of equity asset classes, according to Glenmede’s Jason Pride and Michael Reynolds.

In commodities, oil held its biggest drop in almost two weeks as discussions on a possible cease-fire in the Middle East reduced the risk premium for crude. Gold was little changed.

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  • Scott Gordon says:

    I do get the idea that the ‘authors ‘ may walk a fine line as far as reporting on the Chinese economy .
    yet not many are bullish for investing in China .
    The worlds biggest Ponzi scheme is going bust .
    Developers are facing bankruptcy and liquidation claims .
    They cannot even pay the interest on the debt !
    25 % of GDP down the tubes .
    Even if existing sites were completed , who would stay in them ?
    Millions of workers not getting paid , consumerism has ground to an halt .
    Tech has pretty much moved out .
    Wonder how long will Tesla last 🙂
    Some groups are complaining about Chinese ‘dumping’ , lots of steel they cannot use locally , break even is cool .
    EVs are on the list , BYD just posted another decline .
    The PV market is also way over sold , for the next 10 years , that is the main guy talking .
    The banking sector is also taking hits , so many bad debts , some getting downgrades .
    Local govts are not selling land , major income source dead .
    6-800 million affected .
    The other 600 million will keep struggling as it cannot really get worse . They are not the consumers of local goods .
    Lifted out of poverty by dropping the level .
    Plans a moon base to acquire the water rights on the south pole 🙂 More guys to their space station .
    And into the SCS , Phil can easily modify their boats for water cannon protection .
    The CCP wants world domination , their economy is in tatters .
    1 child policy , in 70 years only 450 million Chinese !

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