Business Maverick

Business Maverick

Chinese tech stocks outperform in Asia, yen drops: markets wrap

Chinese tech stocks outperform in Asia, yen drops: markets wrap
A bull statue in front of the Shenzhen Stock Exchange building in Shenzhen, China on Tuesday, May 7, 2024. (Photo: Raul Ariano/Bloomberg)

Chinese tech stocks rallied ahead of earnings from industry bellwethers, while other Asian markets were range bound as investors awaited US inflation readings due this week.  

The Hang Seng Tech Index jumped more than 1%, lifted by gains in Tencent Holdings and Alibaba Group , which report results later on Tuesday. Investors are looking to China’s Big Tech earnings for confidence that a nascent rally in the nation’s stocks can continue. Shares were steady in Japan while those in Australia dipped. 

“With all eyes on earnings from Tencent and Alibaba, both will need to deliver earnings above consensus results and inspiring guidance as expectations are high,” according to Chris Weston, head of research at Pepperstone Group.  

Japan’s 20-year government bond yield climbed to its highest level since 2013 on speculation the central bank will reduce debt-buying amounts at its regular operations again. The yen slipped against the greenback for a third session. A Bloomberg dollar index was flat as US 10-year Treasury yields were little changed.  

With the latest Chinese economic data pointing to a patchy recovery, any earnings miss may cool the market’s momentum. Hong Kong markets are closed Wednesday for a holiday, so reactions to the results will be first seen in the Nasdaq Golden Dragon China Index. 

US futures edged lower in Asia trading after the S&P 500 closed little changed. Later Tuesday, economists will parse US producer prices data to assess the impact of categories that feed into the Federal Reserve’s preferred inflation gauge. Chair Jerome Powell is also scheduled to speak. US consumer price index due on Wednesday is projected to show moderation while still remaining too high to warrant rate cuts. 

Some prominent trading desks are warning that investors should gear up for a potential break in the calm that’s come over stocks. The options market is betting the S&P 500 will move 1% in either direction after Wednesday’s CPI, according to Andrew Tyler at JPMorgan Chase & Co. On Monday, a Fed Bank of New York survey highlighted an increase in expectations for inflation.

“The key risk is a hotter CPI print,” Tyler said. “But upcoming macro data creates a two-tailed risk — with one tied to stronger-than-expected growth fueling inflation concerns and the other being weaker growth fueling either recession or ‘stagflation’ concerns.” 

Elsewhere, Australia’s Treasurer Jim Chalmers on Tuesday will announce the government’s books are in the black for a second straight year, putting the nation’s fiscal standing near the top of developed-world counterparts. 

On corporate news, market watchers will also be looking for the next step in BHP Group’s takeover battle, after its second approach for rival Anglo American Plc that valued the miner at $43 billion was rejected.

In commodities, oil held a gain before the release of OPEC’s market outlook, with traders looking for clues on whether supply curbs will be extended, and US inflation data that will shape expectations for monetary policy.

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