Hong Kong, Japan, and South Korea saw their stock markets rise as Asian stocks followed a trend set by a tech rally in the US. The MSCI Asia Pacific Index experienced its most significant surge in a month, with chip-related stocks mirroring the strength shown by their American counterparts. Australian dollar also saw a rise in value against a weakening greenback due to hot inflation data, suggesting price pressures in the region and potentially keeping rates at a 12-year high by the local central bank. Additionally, South Korean won led the gains among Asian currencies, while Treasuries remained relatively stable.
The attraction of US tech giants’ performance, coupled with weaker business activity indicators in the US, fueled expectations for potential interest rate cuts by the Federal Reserve. Amidst Wall Street’s anticipation of tech earnings, Asia also entered a busy week for corporate results. Market strategist Matt Simpson noted a positive bounce in Wall Street ahead of Big Tech earnings, which was expected to extend to Asian equity markets but refrained from calling it a full risk-on rally.
On Wall Street, the S&P 500 enjoyed its most robust back-to-back rally in two months, with chipmakers like Nvidia Corp. leading the surge. Chip industry optimism was further boosted by a bullish revenue forecast from Texas Instruments Inc., suggesting a positive outlook for Asian producers on the following day. Oil prices also held steady amidst reports of decreasing US crude stockpiles and the progress towards imposing new sanctions on Iran, while gold saw a slight increase.
In the corporate sphere, Silchester International Investors revealed a stake in Nikon Corp., causing a nearly three-year peak in the company’s shares. SenseTime shares trading was halted after a significant surge in Hong Kong following the debut of its improved AI model. Heading into the next day, Tesla Inc. had a significant surge in late US hours, despite missing sales targets, marking the start of earnings season for the “Magnificent Seven” megacaps.
According to Morgan Stanley’s Mike Wilson, the pressure is high for US firms to deliver strong earnings, particularly in the tech sector facing tough year-on-year growth comparisons. Major companies like Microsoft Corp., Meta Platforms Inc., and Alphabet Inc. are all expected to report earnings that week, with a forecasted 40% increase in profits for the “Magnificent Seven” group from the Bloomberg Intelligence data. These tech megacaps play a pivotal role in the S&P 500 due to their substantial weightings in the index, though high valuations remain a concern.