Business Maverick

Business Maverick

Asian stocks rise as US economic momentum slows: markets wrap

Asian stocks rise as US economic momentum slows: markets wrap
Pedestrians cross a road in Pudong's Lujiazui Financial District in Shanghai, China, on Monday, 15 April 2024. (Photo: Raul Ariano/Bloomberg)

Asian stocks climbed on Friday as the latest round of US economic data signalled momentum is slowing, boosting the case for the Federal Reserve to start cutting interest rates this year. 

The MSCI Asia Pacific Index rose 0.6% as Australian, Japanese and Chinese shares gained. US futures contracts slipped after Dell Technologies Inc. sank in post-market trading as its revenue increase failed to impress investors. Asian stocks are on track to end the month about 2% higher, as the dollar eased on expectations the Fed can still cut this year, while Chinese authorities indicated support for its beleaguered property market. 

“There’s been a bit of profit taking of late in Chinese equities — especially HK-listed names,” said Chamath de Silva, senior fund manager at BetaShares Holdings in Sydney. “But the broader trend is pointing to a rebound on an improved economic and liquidity environment.”

China’s official manufacturing and non-manufacturing PMIs missed estimates on Friday, with the former falling back into contraction.

The yen fluctuated after Japan’s industrial output in April expectedly fell, while the nation’s jobless rate was unchanged. Still, Inflation in Tokyo — a barometer for the wider country — accelerated in May, keeping the Bank of Japan largely on track to consider a rate hike in coming months. Money markets are pricing about 29 basis points of rate hikes by year-end, up from 20 basis points at the start of May, according to data compiled by Bloomberg. 

The S&P 500 slid 0.6% to 5,235 on Thursday, led by tech losses. US officials slowed the issuing of licences to chipmakers such as Nvidia Corp. and Advanced Micro Devices Inc. for large-scale AI accelerator shipments to the Middle East, according to people familiar with the matter. 

The dollar was steady while US Treasuries extended Thursday’s gain in Asia, ahead of the release of the Fed’s favourite price gauge and following a report a report showed the US economy grew at a softer pace — as both spending and inflation were marked down. Economic cooling may bolster the case for policy easing, but that might also imply weaker consumption, and ultimately become a concern for Corporate America 

With markets expecting the core PCE measure to ease slightly in April from a month ago, anything less “could weigh on the US dollar modestly,” said Kristina Clifton, a senior economist and strategist at Commonwealth Bank of Australia in Sydney. 

Read: The Fed Thinks It’s Fighting Inflation. Think Again: Bill Dudley

Elsewhere, a jury found Donald Trump guilty on all 34 counts of falsifying business records at his hush-money trial, making him the first former US president to be convicted of crimes. With Trump due to face sentencing on 11 July, the conviction creates a daunting legal and political path as he faces President Joe Biden in November as the presumptive Republican nominee.

“Expectations for a guilty verdict were somewhat priced into markets,” Paresh Upadhyaya, director of fixed income and currency strategy at Amundi Asset Management in Boston. “The bigger impact to markets could be if this guilty verdict begins to turn the momentum away from Trump to Biden.”

Focus will soon shift to European inflation data due as investors debate how much the European Central Bank can cut after it likely eases policy next week.

While significant progress has been made to bring inflation back into the ECB’s target, “the path of inflation going forward is likely to be more turbulent,” said Orla Garvey, senior portfolio manager for fixed income at Federated Hermes Ltd. “Combine this with an improving growth outlook across the eurozone, markets may be less confident of the future path of ECB base rates, and lean towards pushing out some cuts in 2025 – as has been the case in recent weeks.”

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